Government planning to allow investors to use Aadhaar in place of PAN for investment into small saving schemes

Date : 29/03/2023
Read: 3 mins

Use of Aadhaar, not PAN, in small saving schemes

Government-backed small-saving schemes are quite popular among investors. These include the Sukanya Samriddhi Yojana (SSY), National Savings Certificates (NSC), Senior Citizen Savings Schemes (SCSS) and the Public Provident Fund (PPF).

They are affordable, allow guaranteed returns, and help you create a suitable corpus for your financial goals. Moreover, many of these schemes offer tax-saving benefits if you file your taxes under the old tax regime.

In a bid to make these schemes more popular and increase their penetration, the Finance Ministry is mulling liberalised investment formalities. The KYC requirements of these investments would relax, and investors would be allowed to use their Aadhaar card details. The PAN number would not be required.

Three important changes to the KYC norms were made for investment into small saving schemes. These changes are as follows –

Investors can use Aadhaar to complete the KYC formalities. PAN card details would not be needed. The KYC formalities for the small saving schemes would be the same as that of the Jan Dhan bank accounts.
In the case of the death of the depositor, the process of allowing legal heirs to claim the deposit would become easier. If there’s no dispute over the investment, the legal heirs would be able to withdraw the funds easily.
The nomination process would become simpler so that the deposits are easily handled when the depositor dies.

Benefits of the proposed change

As the Finance Ministry proposes to relax the existing KYC norms, it expects it to benefit the lower strata of the population and drive the growth of these schemes.

Here are some of the expected benefits –

Increased penetration

Compared to owning a PAN Card, a larger proportion of the population owns an Aadhaar Card. The move will, thus, enable Aadhaar cardholders to deposit into small saving schemes with relaxed norms. This would drive the popularity and penetration of such schemes.

Will target rural India

The move will allow the rural population to invest in these saving schemes to create a secured corpus for their financial goals. Given the lack of documentation, rural India has limited access to formal investment avenues. The relaxation would allow them to benefit from the small savings schemes.

Managing the fiscal deficit

As the popularity of small savings grows and more investors invest in the schemes, the National Small Savings Fund (NSSF) will see enhanced inflows. The Central Government can partially use the additional inflow to fund its fiscal deficit. This would also reduce the dependence on market borrowing.

While the changes have not yet been officially incorporated, investing in small saving schemes will become easier once they come into effect. So, know these changes for a hassle-free and time-saving investment process.

Three important changes to the KYC norms were made for investment into small saving schemes. These changes are as follows –

Investors can use Aadhaar to complete the KYC formalities. PAN card details would not be needed. The KYC formalities for the small saving schemes would be the same as that of the Jan Dhan bank accounts.
In the case of the death of the depositor, the process of allowing legal heirs to claim the deposit would become easier. If there’s no dispute over the investment, the legal heirs would be able to withdraw the funds easily.
The nomination process would become simpler so that the deposits are easily handled when the depositor dies.

Benefits of the proposed change

As the Finance Ministry proposes to relax the existing KYC norms, it expects it to benefit the lower strata of the population and drive the growth of these schemes.

Here are some of the expected benefits –