What the Aadhaar ruling means for consumers4 min read . Updated: 27 Sep 2018, 09:32 AM IST
Aadhaar will not be mandatory for availing banking and financial services, it will be required to file tax returns
The Supreme Court has upheld Section 139AA of the Income Tax Act, while striking down the PMLA rule that made Aadhaar mandatory for bank accounts. What this means is while Aadhaar will not be mandatory for availing banking and financial services, it will be required to file tax returns
Insurance services will suffer
R.M. Vishakha, CEO and managing director, IndiaFirst Life Insurance
It will be really unfortunate if we remove an enabler instead of ensuring protection of privacy of data. For the insurance sector, Aadhaar has been a huge blessing because it allows online authentication of customers leading to quick issuance of policies and improves the service aspect. Aadhaar authentication helps even during revival of policies, and makes disbursement of unclaimed money simpler because we can authenticate bank accounts through Aadhaar. For the insurance industry, where fraud and impersonation is a high risk, Aadhaar was a substantial support.
If Aadhaar is no longer mandatory for issuance of insurance policies, any process that requires Aadhaar will be questioned and implementation of Aadhaar-based e-KYC will become challenging. For us, this will mean the inability to implement e-KYC for instant issuance of policies which will hit our channels that focus on e-process of issuance of simple policies because the service aspect of instant issuance will be disrupted. This could also mean that the industry turns to alternate options for e-KYC, something that a government-led institution was doing already. The focus should be on strengthening data privacy and not on removing services that benefit customers.
Ruling gives clarity to taxpayers
Archit Gupta CEO and founder, ClearTax
I am happy with the Aadhaar verdict because until now lack of enough clarity on who should provide Aadhaar while filing tax returns had caused a lot of confusion for taxpayers. Taxpayers were uncertain about whether to mention Aadhaar details in their tax returns. This verdict has cleared uncertainty about whether or not Aadhaar must be quoted in tax returns and if it is required for making PAN applications. These two requirements are laid down in section 139AA of the Income Tax Act, and were introduced in the Finance Act, 2017. This has been settled now; both PAN and ITR forms must now report Aadhaar details.
Also, the verdict lays emphasis on the Aadhaar mechanism as a means to curb PAN duplication. It reposes faith in Aadhaar and PAN linkage being valid and useful to curb black money. With de-duplication of PAN, tax compliance is bound to go up, so the government has a valid cause for bringing in this legislation. It is also transparent as PAN and Aadhaar linkage or mentioning of Aadhaar details in ITR forms does not violate the right to privacy of any individual.
e-KYC for MFs may be affected
A. Balasubramanian CEO, Birla Sun Life Asset Management
The Supreme Court’s verdict on Aadhaar said corporates cannot use Aadhaar as a means to validate their customers at the time of on-boarding them. I am not sure whether mutual funds are excluded from this ruling, and we would have to wait for clarity. Mutual funds on-board new customers every day. If we cannot use Aadhaar for the same—which has been optional so far—then we need to await further instructions from Sebi. Mutual funds had made use of Aadhaar to make digital on-boarding easier.
At present, if customers have Aadhaar, then on-boarding and KYC documentation happens much faster online. Through the OTP process, a customer can invest up to ₹ 50,000 per fund house, per year. But if she chooses to give her biometrics (fingerprint), then she can invest whatever amount she wishes to, because biometrics is as good as in-person verification, an important aspect of the KYC process, as prescribed by Sebi. But now since private companies are disallowed to use Aadhaar, the mutual fund industry has to think about what to do next and wait for clarification.
Power rests with consumers
Adhil Shetty CEO, BankBazaar
I think it’s a big win for the industry that the constitutional validity of Aadhaar has been upheld once and for all. Although Aadhaar is optional for private organisations, we have seen that e-KYC has tremendous consumer traction on an optional basis.
Data shows that about 60% of consumers at BankBazaar opt for e-KYC even now because of convenience. Indian consumers are smart. They are not doing it because they have been forced to. They know that if they do it electronically with Aadhaar, they will get their loan in 24 hours, whereas if they do it using the old process with their PAN or ration card, it will take several days. The biggest benefit of e-KYC is the convenience it offers. People also understand that e-KYC on your mobile phone is more secure than giving a copy of your PAN to someone. It’s a good thing that it’s been made optional because now the power is in the consumer’s hand. We are going to see tremendous adoption of e-KYC and Aadhaar even on an optional basis.
One of the most important things about Aadhaar that the court has highlighted is that it drives empowerment. We can’t deliver a mutual fund in a small town if we have to go to the consumer, do the paperwork and issue it manually. Going paperless is the only way to democratise finance.