What is the purpose of Unique Identification Number and how is it different from PAN, which is used for income tax purposes?
-Bijendra Jain
The Unique Identification Number (UIN) is part of Securities and Exchange Board of India or SEBI's exercise to create the Market Participants and Investors (MAPIN) database. It is a step towards building a complete database of intermediaries and investors. With the help of the MAPIN database, investors can gain access to the basic information of an intermediary and whether the intermediary is facing any disciplinary action. Similarly, an intermediary will be able to able to verify the client's identity. While it is compulsory for market intermediaries, investors having transactions of over Rs 1 lakh and above will also need a UIN.
The Permanent Account Number of Income Tax or PAN is used as an identification number for filing income tax and to bring better tax enforcement. The MAPIN system is far more advanced for identification as it makes use of biometrics to determine the uniqueness of natural persons. As part of the application process, this system scans fingerprints, takes a photograph and scans signature. This might seem to be a bit cumbersome, but in the long run it is expected to provide better access to information about various participants and the overall improvement in the functioning of the whole system. This is because by way of a UIN, information about the intermediaries will be available to the public on the Internet. Therefore, you can easily get to know if he is guilty of any kind of default, which you would not have known earlier. Moreover, it will enable the regulator to keep a watch over the various market participants.
Although many of the distributors are advising all their clients to get a UIN, irrespective of the size of their transactions, but as an individual investor, you will need it only for transactions above Rs 1 lakh from April 1, 2005. Thus, if you fall in a lower investment bracket, you need not worry about it for the time being.
This article was originally published on March 23, 2005.
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