After a slew of debates that spread across several months, the government is looking to make Permanent Account Number (PAN) the business Aadhaar for non-government organisations (NGOs) as well as companies. This was proposed as an add-on solution to curb the propagation of black money in the country.
The Ministry of Corporate Affairs (MCA) will be making amendments to the Prevention of Money Laundering Act and the Income Tax Act for this purpose. The Government will mandate all entities with annual cumulative transactions of over Rs.2 lakh to be in compliance with the regulations.
Although most NGOs and businesses have PAN, it is used only for cash transactions above Rs.50,000 and for adhering to know-your-customer (KYC) regulations in banks. The proposed amendments will check the possibilities of misuse.
Partnership firms and other companies will be required to furnish Aadhaar when registering the business, so that individuals who are the promoters of these businesses can be tracked in a straightforward manner. This will also bring about a reduction in floating benami companies.
MCA already has a system in place for generating PAN for companies at the time of registration. This process usually takes less than a day. But this facility was not extended to trusts and partnership firms, as these are handled by state governments or agencies. After the proposed amendments are made, all entities will be on the same platform, and their operations can be tracked effortlessly.
In the earlier discussions pertaining to the matter, the ministry had proposed the development of a unique identity for a business, much like Aadhaar. But it has now finalised on using PAN for the purpose.
Recently, the government has identified several benami companies at multiple levels. Sebi has acted against these businesses and MCA has cancelled the registration of more than 2 lakh businesses that had not filed tax returns for years. The directorship of the board members of these companies were also cancelled.