How integrating PAN 2.0 with Aadhaar, ‘e-Rupee’ can streamline investments, KYC

Similarly, for opening a dematerialised (demat) and share trading accounts or for investing in mutual funds, a copy of your Aadhaar card must be scanned and uploaded as address proof and the PAN card as identity proof in the e-KYC window.

It’s said that we live in a digital era where everything is online. But the scenarios outlined only amplify the ground-level necessity of carrying physical KYC documents at all times.

Recently, the Union Cabinet approved the PAN 2.0 project with an outlay of ₹1,435 crore. The project will enable the use of PAN as a common identifier for the digital systems of specified government agencies.

It’s been clarified that all current PAN cardholders are automatically eligible for the PAN 2.0 upgrade and there is no need to reapply. Enhancements such as a dynamic QR code and a centralised portal for all PAN-related services such as allotment, updating, correction, and Aadhaar-PAN linking are designed to improve the usability of the PAN card, in alignment with the government’s digitalisation objectives.

To request the new QR-enabled version, existing PAN card holders must log in to the income tax department’s unified portal and upload their identity and address proof. The e-PAN 2.0 will be offered free of charge to all taxpayers. Individuals who want a physical PAN 2.0 card need to apply and pay a fee of ₹50, if residing in India.

Practical utility

The upcoming enhancements in the form of a dynamic QR code will serve the purpose of validating PAN details and providing information such as name, date of birth, and photograph when scanned, using a compatible reader application.

Still, there is tremendous scope to increase the practical utility and coverage of the dynamic QR code feature and do away with the need of physical KYC documents. The dynamic QR code can be made to store all essential KYC credentials and details of cardholders such as name, father/mother’s name, address, date of birth, photograph and signature in encrypted form, to be accessed and used only with the cardholder’s consent using blockchain technology security features.

Integrating the Aadhaar card’s address details in the dynamic QR code can make PAN 2.0 a universally acceptable single-point identity and address proof identifier for investments across asset classes (stocks, mutual funds, real estate). Dynamic QR codes can also act as a digital identity token, allowing seamless authentication at airports, hotels, and other service points.

Imagine just flashing the dynamic QR code of your e-PAN 2.0 for all KYC requirements – whether it is opening a bank, demat or share trading account, airport security, hotel check-ins, or for that matter, applying for a new sim card for your phone.

Also, each PAN card already contains the scanned image of the photograph and signature of the cardholder. Including the scanned photograph and signature in the dynamic QR code of PAN 2.0 will enable cardholders to simply digitally sign various KYC forms and agreements using their PAN-linked e-signatures, thus doing away with the need for wet-ink signatures and physical submission of such forms.

Digital currency

The practical utility of the dynamic QR code feature can be enhanced by integrating it with the Reserve Bank of India’s digital currency. Officially known as the Central Bank Digital Currency (CBDC), it is a digital form of the Indian rupee issued and regulated by the central bank.

Unlike cryptocurrencies, CBDC is a sovereign currency, offering the advantages of digital payment systems while retaining the stability of fiat money. The RBI has already launched its digital currency ‘e-Rupee’ for both wholesale and retail sector financial transactions.

By embedding the dynamic QR code with the digital wallet associated with the ‘e-Rupee’ into various investment platforms, investors can instantly comply with KYC onboarding requirements and simultaneously execute their investment transactions on a real-time basis, eliminating physical verification and interbank settlement delays.

The integration of the dynamic QR code of PAN 2.0 with the ‘e-Rupee’ can provide a cost-effective alternative to traditional banking, enabling even users without bank accounts to transact securely in the sovereign digital currency. Unlike the Unified Payment Interface (UPI) framework, the RBI’s ‘e-Rupee’ works fully in offline mode. It can also help in international travel by undertaking currency-agnostic secure transactions without the hassles of foreign exchange delays.

Thus, the integration of the dynamic QR Code feature of PAN 2.0 with the Aadhaar card and the RBI’s digital ‘e-Rupee’ can indeed become a game changer in ensuring ‘paperless KYC’ and ‘wallet-less’ secure financial transactions, transforming the ‘Digital India’ initiative of the Modi government in a never-thought-of manner before.

By fostering faster investments, simplifying KYC, and enhancing travel and leisure, this synergy has the potential to reshape key sectors of the economy and mark a transformative step towards a digitally empowered financial ecosystem.

Mayank Mohanka is the founder of TaxAaram India and a partner at S.M. Mohanka & Associates.