Permanent Account Number (“PAN”) issued by the Income Tax Department is a mandatory unique number required for the purpose of all Income tax related compliance in India. PAN also acts as an Identity proof of Indian residents. However, persons who are non-residents and are having presence in India for limited purposes may also need to apply for PAN in certain cases.
Permanent Account Number or PAN is mandatory for all the persons including NRI who are required to file their Income tax return (“ITR”) under Income Tax Act, 1961 or who wish to carry out financial functions in India. Therefore, it is mandatory for all those NRIs who wish to operate or invest in India to apply for PAN.
1. Who needs to apply for PAN as NRI?
PAN is a prerequisite for every person who wants to file Income tax return in India or who wants to enter into a transaction where quoting PAN is mandatory as per Income tax act. Therefore, in such scenarios, it becomes mandatory for a person to apply for PAN.
List of transactions where quoting PAN is mandatory is given in Rule 114B of Income Tax Rules read with Section 139A(5)(c) of Income Tax Act. Department has added various new transactions in this list to curb the black money generation and improve transparency. However, exemption is provided to NRI to quote PAN for few transactions.
Section 114B defines following transactions where reporting of PAN is mandatory for NRI:
- Sale or purchase of motor vehicle, other than two-wheeler.
- Opening a bank account (other than saving account and fixed deposits). Therefore, for the purpose of opening a current account with a bank, it is mandatory to have PAN.
- If an NRI wishes to invest in the Indian Capital market including mutual funds and shares as it is mandatory to quote PAN for opening DEMAT Account with depository, participant, custodian of securities or any other person with SEBI.
- For investment in units of mutual funds, exceeding INR 50,000, NRI needs to quote PAN first.
- Deposition of cash with a bank or a co-operative bank for an amount exceeding INR 50,000.
- Payment made to any company or institution for purchase of bonds exceeding INR 50,000.
- Creating term deposit/fixed deposit with any bank or co-operative bank of exceeding INR 50000 or where aggregate amount of all FDs during a financial year exceeds INR 5,00,000.
- Payment of life insurance premium where aggregate payment during the financial year exceeds INR 50,000.
- If an NRI has a property or land. Sales or purchase of immovable property requires quotation of PAN if value of property or stamp duty value of the property is exceeding INR 10 Lacs.
- Entering in contract of sales or purchase of securities, other than Shares, where value of transaction exceeds INR 1,00,000.
- Sale or purchase of unlisted shares where value per transaction exceeds INR 1,00,000.
2. What are the benefits of NRI PAN?
NRI PAN is a widely accepted proof of identity throughout the country. Therefore, holding a PAN doesn’t only help into entering various transactions but also smoothen identity related activities. PAN can have following benefits:
- It helps in smooth flow of taxation procedure
- Can easily buy properties, land and assets.
- Can invest in the capital market.
- It is easy for the process of KYC.
3. What are the documents required for NRI PAN?
Different sets of documents are required for Individual or HUF or other body corporates. For PAN Application, documents are required for Identity proof and address proof.
3.1 Documents required for Non-resident Individual or HUF for NRI PAN
Identity Proof for NRI PAN:
- 2 recent passport size photos.
- Copy of a Passport (No attestation is required) or
- Copy of person of Indian Origin (PIO) card issued by Government of India (No attestation is required) or
- Copy of Overseas Citizen of India (OCI) card issued by government of India (No attestation is required) or
- Copy of any other national or citizenship identification number or card duly attested by “Apostille” (in respect of countries which are signatories to the Hague Convention of 1961) or by the Indian Embassy or High Commission or Consulate in the country where the applicant is located or authorised officials of overseas branches of Scheduled Banks registered in India.
- Address Proof for NRI PAN
- Copy of a Passport or
- Copy of person of Indian Origin (PIO) card issued by Government of India or
- Copy of Overseas Citizen of India (OCI) card issued by Government of India or
- Copy of Bank statement in the country of residence or
- Copy of Non-resident External (NRE) bank account statement in India, or
- Copy of Certificate of Residence in India or Residential permit issued by the State Police Authorities, or
- Copy of Registration certificate issued by the Foreigner’s Registration Office showing Indian address, or
- Copy of Visa granted & Copy of appointment letter or contract from Indian Company & Certificate (in original) of Indian address issued by the employer.
Note: Above mention proof is of residence address. However, In case NRI have any Office Address of India then in addition to the above mentioned proof of address, following additional document is also required:
- Copy of appointment letter/contract from Indian Company and
- Certificate (in original) of address in India of applicant issued by authorized signatory of employer on employer’s letter head mentioning the PAN of the employer and
- Copy of PAN card for the PAN mentioned in the employer’s certificate.
3.2 Documents required for Non-resident other than Individual or HUF, i.e, company or Firm or AOP or BOI
- Proof of identity and address for NRI PAN
- Certificate of Registration issued in the country where the applicant is located, duly attested by “Apostille” (in respect of the countries which are signatories to the Hague Convention of 1961) or by the Indian Embassy or High Commission or Consulate in the country where the applicant is located or authorised officials of overseas branches of Scheduled Banks registered in India; or
- Copy of registration certificate issued in India or of approval granted to set up office in India by Indian Authorities.
4. Process of applying for NRI PAN
To apply for PAN, NRIs need to visit https://tin.tin.nsdl.com/pan/.
- NRIs, who are Indian citizens, are required to fill Form 49A. Whereas, NRIs with citizenship of another country are required to fill up Form 49AA.
- On entering the information given in form and after verifying it, a acknowledgement slip will appear with a 15 digit code. Take the print out of the form and acknowledgement slip.
- In the space provided, paste 2 passport size photos and in the other provided box sign it with black ink or use thumb print.
- Attach all the documents as asked with the applications.
- The acknowledgement should reach the designated address within 15 days of form submission.
6. Payment Procedure for NRI PAN
- The fees can be paid via debit card, credit card or net banking for online payment methods.
- In case the NRI wants to pay the fee offline, he/she can issue a demand draft.
Although the process of getting an NRI PAN seems easy, it is always advised to opt for agencies or consultants who work regularly in this field.
7. Points to be kept in mind while applying for the NRI PAN
- Address:- A person must provide a valid residential address of the country he/she is residing in for communication purposes. In case the person does not have a valid residential address, then he/she can give the address of his/her office or the address of his/her residence in India.
A person should provide his/her genuine email address and postal address for further communication. If the person gives a foreign address then a complete address should be provided including the postal code, province name and country name. The courier charges will be more for such addresses.
- Photograph and Signature:– The person must provide the authority with a recent photograph. The signature should not be overwritten or smudged. The photograph and application in the acknowledgement slip should match with that of the ones submitted in the application.
8. Penalty Consequences for non-compliance
8.1 Penalties for holding more than one NRI PAN
Income tax act permits a person to hold only one PAN. Therefore, if a person holds more than one PAN then a penalty of INR 10,000 shall be imposed under section 272B of Income Tax Act.
If you are inadvertently allotted with more than PAN then it advisable to surrender the additional PAN.
8.2 Not holding PAN or incorrect reporting of PAN
Every person who is mandatorily required to hold a PAN shall provide correct PAN for the transactions provided under Rule 114B. Further, correct PAN should be provided to the person liable for deducting or collecting tax.
Therefore, if a person fails to hold a PAN or intentionally quote incorrect PAN, wherever required, then a penalty of INR 10,000 shall be imposed on him under section 272B of Income Tax Act.
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