Fake PAN, ration cards are a menace: How Aadhaar with biometric features can smoke out crooks

Of the 1.1 million permanent account numbers (PAN) that the government deactivated last month, income-tax (I-T) sources say a majority were duplicates and were being used to open share-trading and demat accounts, transact on the stock markets, and operate in shell firms. The I-T department has discovered one individual could have five to seven PAN cards, each with a slightly different spelling of the holder’s name.

What the tax sleuths have discovered is the general practice in the country to hog privileges and scarce/essential commodities. Fake ration cards are suspected to be in use in large numbers so that essential commodities could be gotten at subsidised prices and sold in the open market. The 2005 Yes Bank IPO invokes stirring and shocking memories of fake cards and applications. Ms Roopalben Panchal, an intrepid crook, submitted around 5,000 applications all for herself but in different names and addresses so that she could hog as many shares as possible reserved for small investors by the company in accordance with the Sebi norms and then go on to make a killing in the market. Thank God her lie was nailed and bluff called.

One might wonder what fake and duplicate PAN could bring to its holder. The answer lies in the progressive or slab rates of income taxation in the country.  With no income tax being payable on annual income up to Rs 2.50 lakh, crooks resort to splitting of income in multiple names — some ghosts and some pliable and docile members of the family.  Fake or duplicate PAN is an essential concomitant of this devious game plan. The resultant tax savings could be enormous to crooks but correspondingly inflicting a huge loss on the exchequer. To wit, 10 PANs where there should be one results in a tax savings of Rs 10.75 lakh given the income of Rs 50 lakh contrived to have been earned by ten persons whereas the reality is it was actually earned by a single individual—-tax on Rs 5 lakh each for ten persons is Rs 2.5 lakh whereas tax on a single individual on an income of Rs 50 lakh is Rs 13.25 lakh.  Obviously the exchequer has been losing heavily.

It is therefore wrong to take comfort from the increasing numbers of PAN and ITR.  Both can be misleading if the heightened numbers reflect more the efforts and splitting of income through artifice than genuine compliance. The government is right in waking up to this pernicious practice which not only goes on by stock market operators but by others as well.

Its first reaction was to link Aadhaar with PAN because in tandem or in juxtaposition they would smoke out the crooks because Aadhaar has biometric features, absent in PAN.  Therefore for a crook his game is up when his bluff through a fake or duplicate PAN is called by the mismatch between the two identification documents. Critics say the riposte by the government was convoluted—it could have simply gone for PAN with biometric features.  But that would impose a needless burden on both the government and the taxpayers because when already there is a document bearing biometric features, there is no point in replicating the effort.

 This link between PAN and Aadhaar is definitely going to eliminate fake and duplicate PAN cards but in the meanwhile the tax sleuths have done well to act independently and deactivate as many as 1.1 million fake/duplicate PAN on the basis of data the department has mined.

Eliminating fake PAN is as important as eliminating fake ration cards.  The latter result in government subsidy being misused.  The Tamil Nadu government has effectively checked this menace by introducing smart ration cards linked to Aadhaar.  In Tamil Nadu, PDS is universal and hence the need for greater vigilance against impostors and charlatans.  Smart cards with biometric features is indeed the way forward to check the menace of fake and duplicate entitlement cards.

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