Aadhaar, the UIDAI issued biometric identity card, may soon become a mandatory requirement for key financial transactions such as share trading and mutual fund purchases according to a recent report by the Economic Times. This change proposed by the market watchdog SEBI (Securities and Exchange Board of India) and the Government of India is designed to curb illegal practices such as conversion of black money to white through the equities market. As per current rules, PAN is the only compulsory proof required for trading in shares, while Aadhaar may be used for eKYC (electronic KYC) purposes by individuals seeking to invest in mutual funds.
According to ET sources familiar with the development, the decision is being taken after the Government realized that PAN information by itself is not sufficient to resolve the issue of tax evasion through stock markets. The report also mentions that top SEBI officials have informally contacted a handful of securities market intermediaries to seek out their opinions with respect to implementing this change. This report comes on the back of a recent clampdown on tax evasion through shell companies by SEBI and RBI, which seems to have spooked D-Street this week.Incidentally, the suggestion of using Aadhaar as a mandatory requirement for share market investors has been around a while with many brokerages championing the cause. According to some brokers, some unscrupulous individuals have multiple PAN, which allows them to create multiple DEMAT accounts that can be used to evade taxes or convert undisclosed income into white money. The introduction of Aadhaar and its biometric database as a mandatory requirement would help curb or even eliminate such illegal practices. If a decision in favour of this change actually happens, it could potentially change India’s brokerage landscape and significantly impact the stock trading industry as a whole.
According to ET sources familiar with the development, the decision is being taken after the Government realized that PAN information by itself is not sufficient to resolve the issue of tax evasion through stock markets. The report also mentions that top SEBI officials have informally contacted a handful of securities market intermediaries to seek out their opinions with respect to implementing this change. This report comes on the back of a recent clampdown on tax evasion through shell companies by SEBI and RBI, which seems to have spooked D-Street this week.Incidentally, the suggestion of using Aadhaar as a mandatory requirement for share market investors has been around a while with many brokerages championing the cause. According to some brokers, some unscrupulous individuals have multiple PAN, which allows them to create multiple DEMAT accounts that can be used to evade taxes or convert undisclosed income into white money. The introduction of Aadhaar and its biometric database as a mandatory requirement would help curb or even eliminate such illegal practices. If a decision in favour of this change actually happens, it could potentially change India’s brokerage landscape and significantly impact the stock trading industry as a whole.