AADHAAR AND ITS ROLE IN FACILITATING FINANCIAL TRANSPARENCY IN INDIA!
In the digital age, governments worldwide are exploring innovative ways to monitor and regulate financial transactions to combat fraud, tax evasion, and money laundering. India, with its vast and diverse population, has introduced Aadhaar, a biometric identification system, to aid in this endeavor. Aadhaar has proven to be a valuable tool for the Indian government in tracking the transactions of its citizens, and in this article, we will delve into how it accomplishes this task.
AADHAAR: A BRIEF OVERVIEW
Aadhaar, which means “foundation” in Hindi, is a 12-digit unique identification number issued by the Indian government to residents. It was launched in 2009 and has since become one of the world’s largest biometric identity systems, with over a billion people enrolled.
Linking Aadhaar to Financial Services One of the primary ways Aadhaar helps the government track transactions is by linking it to various financial services. For example:
- Bank Accounts: To open a bank account or operate an existing one, individuals are required to link their Aadhaar number. This linkage makes it easier for the government to monitor financial transactions.
Mobile Numbers: Aadhaar is also linked to mobile phone numbers, making it possible for authorities to track electronic transactions and communications.
Income Tax: Aadhaar is often used for filing income tax returns, ensuring that all financial activities are accounted for and taxes are paid appropriately.
Subsidy Disbursement
A significant portion of India’s population depends on government subsidies for various essentials such as food, fuel, and housing. Aadhaar plays a crucial role in the direct benefit transfer (DBT) system, which ensures that subsidies reach the intended beneficiaries. By linking Aadhaar to these subsidies, the government can track the flow of funds and reduce leakages and corruption.
For instance, the “LPG subsidy” is directly credited to the Aadhaar-linked bank accounts of beneficiaries, eliminating middlemen and ensuring transparency.
Digital Payments
The Indian government has been actively promoting digital payments to curb the circulation of unaccounted cash. Aadhaar facilitates this initiative by enabling individuals to make secure transactions using their biometric data. Aadhaar-based payment systems like the Aadhaar Enabled Payment System (AEPS) and Unified Payments Interface (UPI) have gained popularity, allowing the government to track electronic transactions efficiently.
Monitoring Government Schemes
Aadhaar helps the government keep tabs on various welfare schemes and their effectiveness. By linking Aadhaar to these programs, authorities can monitor the distribution of resources and ensure
An example is the “Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA),” where Aadhaar authentication is used to prevent ghost workers from receiving wages.
that the benefits reach the intended beneficiaries.
COMBATING TAX EVASION
Aadhaar is also a powerful tool in the fight against tax evasion. By linking Aadhaar to PAN (Permanent Account Number) cards, the government can identify individuals who attempt to evade taxes by holding multiple PAN cards. This has significantly improved the tax compliance landscape in India.
CONCLUSION
Aadhaar has undoubtedly played a vital role in helping the government of India track the transactions of its citizens. By linking Aadhaar to various financial services, subsidies, and government schemes, the Indian government has enhanced transparency, reduced corruption, and improved the efficiency of welfare programs. While Aadhaar’s role in tracking transactions raises questions about privacy and security, it has undoubtedly contributed to India’s efforts to create a more accountable and transparent financial ecosystem.
About Author
Vinayak Savanur
Founder & CIO at Sukhanidhi Investment Advisors, a SEBI registered equity investment advisory firm. He has nearly a decade of experience in the stock markets and has been a holistic financial planner.
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