ePAN with QR code now valid like physical PAN Card

The Government of India is transforming its Permanent Account Number (PAN) system with the introduction of PAN 2.0, a major overhaul aimed at creating a more efficient and secure digital platform. With an investment of Rs 1,435 crore, PAN 2.0 is designed to offer convenience and reduce paperwork, aligning with the government's broader push towards digitization. But as the system shifts to digital, questions arise about whether it can be used for KYC (Know Your Customer), identity verification, and address proof, functions that the older PAN system could not fully handle.

Currently, PAN is mainly used as a tax identifier but also serves as a physical identity proof in many situations. However, it has limitations when it comes to electronic KYC and address verification. While Aadhaar has been widely accepted for these purposes, PAN 1.0, in its digital form, cannot be used for KYC or address proof. This raises the question of whether PAN 2.0 will bridge this gap and work similarly to Aadhaar for KYC and identity verification.

Digital PAN 2.0: Advancing towards paperless processes

PAN 2.0 will be entirely digital, enabling a paperless process for allotment, updates, and corrections. According to a Ministry of Finance press release on November 26, 2024, the system will facilitate an easy and cost-free online process, with e-PANs sent to registered email addresses. If applicants prefer a physical PAN card, they can request one for a fee of Rs 50 (domestic) or additional charges for international delivery. Despite the focus on digital PANs, physical PAN cards will remain an option for those who prefer them.

The digital version of PAN 2.0 will include a dynamic QR code, which experts believe could allow the document to serve not only as a tax identifier but also for KYC, identity verification, and potentially address verification—functions that were previously unavailable with PAN 1.0.

Will PAN 2.0 be accepted for KYC verification?

Currently, PAN alone is not sufficient for KYC; it needs to be accompanied by other documents, like Aadhaar. However, experts are optimistic that PAN 2.0 could change this dynamic. The inclusion of a QR code could make PAN 2.0 eligible for digital KYC, especially as it will be linked to Aadhaar, which is already widely used for identity verification. Legal experts, such as Rahul Jain, suggest that if the government integrates address details into the QR code, PAN 2.0 could replace physical documents for KYC in many cases.

Nevertheless, some experts believe the transition to using PAN 2.0 for KYC may take time. Dip Mehta from EY Forensic and Integrity Services points out that while digital PAN can be used in a fully digital ecosystem, its adoption will depend on regulatory changes and infrastructure development.

The Road Ahead: Challenges and Future of PAN 2.0

While PAN 2.0 promises increased efficiency, it may not eliminate the need for physical cards entirely. In some cases, institutions may still require physical PAN cards for verification. Ankit Jain from Ved Jain & Associates notes that while m-Aadhaar is widely accepted, banks still ask for physical copies of Aadhaar for certain transactions. Similarly, some institutions may continue to request a physical PAN card even with the introduction of PAN 2.0.

As Kinjal Bhuta, Secretary of the Bombay Chartered Accountants' Society, suggests, the dynamic QR code in PAN 2.0 could make physical PAN cards less necessary in the future. However, until the digital infrastructure is universally accepted, both digital and physical formats will likely coexist.

To sum up, PAN 2.0 introduces key enhancements in security and user convenience. However, its complete effectiveness will depend on the widespread adoption of digital infrastructure and the readiness of institutions to support the updated system. Although PAN 2.0 is set to streamline KYC and identity verification, there could still be situations where a physical PAN card is necessary.