June 16, 2021

Specific transactions for which an expatriate will be required to obtain PAN

In India, a permanent account number (PAN) is an identity provided by the income tax authorities to each taxpaying entity and individual, including the foreign nationals who wish to invest or conduct business in India, which is necessary for each one who is needed to file income tax return, and for people who wish to deal in the financial transaction. Expatriates wanting to work in India or to indulge in any business transaction with a company based in India would also need a PAN for such transactions.

1. Who is an expatriate?

An expatriate is an individual living and/or working in a country other than his or her country of citizenship, often temporarily and for work reasons. An expatriate can also be an individual who has relinquished citizenship in their home country to become a citizen of another.

It can be said that an expatriate is a person based in a foreign country (likely national of the said foreign country) working in another country. It includes a person, who for tax purposes, may continue to be a resident in his/her home country.

Thus, in the Indian context expatriate means a person based in a foreign country (likely foreign citizen) working in India (inbound) or a person based in India (likely Indian citizen) working abroad (outbound).

Transactions specified for which an expatriate will be required to obtain PAN

Sr no.	Nature of transactions	Value of transaction
1	Sale or purchase of a motor vehicle or vehicle, which requires registration by a registering authority under chapter VI of Motor Vehicles Act, 1988, other than two-wheeler vehicle	All Such Transactions
2	Opening an account with a Bank (Other than a savings bank account)	All Such Transactions
3	Opening a Demat account with a depository, participant, custodian of securities or any other person with SEBI	All Such Transactions
4	Payment to a company for purchasing debentures or bonds issued by it	Payment exceeding Rs. 50,000
5	Payment to a Mutual Fund for purchase of its units	Payment exceeding Rs. 50,000
6	Deposit with a Bank	Deposit in cash exceeding Rs. 50,000 per day
7	Time deposit with a Bank, Post Office, Nidhi companies, NBFCs	Amount exceeding Rs. 50,000 per day or aggregating to more than Rs. 5,00,000 during a financial year
8	Payment for Life insurance premium	Payment exceeding Rs. 50,000 in a financial year
9	Sale or purchase of securities (other than shares)	Amount exceeding Rs. 1,00,000 per transaction
10	Sale or purchase of unlisted shares	Amount exceeding Rs. 1,00,000 per transaction
11	Sale or purchase of any Immovable property	Amount of more than Rs. 10,00,000 or if valued by stamp valuation authority, amount of more than Rs. 10,00,000

In addition to the above list, following person are also needed to obtain PAN:

Every person if his total financial gain or the total financial gain of any other person in respect of which he is assessable during the previous year exceeds the maximum amount which is not chargeable to tax.
Every importer/exporter, who needs to obtain the Import-Export code.
Every Person who is required to file an income tax return with the Income tax department.
Everyone who is entitled to receive any sum/income after the deduction of tax at the source.
Anyone responsible to pay excise duty to a producer or manufacturer of excisable goods or a registered person of a private warehouse in which excisable goods are stored and a certified agent of such person.
Persons who require the registration and issue invoices under the Rule 57AE under Central Excise Rules, 1944.
Person and his agent, who is responsible to pay the service tax.
Every person who is registered under the Central Sales Tax Act or the general sales tax law of the state or union territory provided by law.
Every person who intends to enter into a financial transaction in which quoting of the PAN number is mandatory.

2.What is PAN?

PAN stands for Permanent Account Number. It is a ten-digit unique alphanumeric number issued by the Indian Tax Department to all or any taxpayers and acts as a distinctive, unique number for all taxpayers in the country.
The Income tax department uses the PAN number issued in the form of a card, as a universal identification key to trace financial transactions that might have a taxable component to monitor activities such as tax evasion, and supporting obeying of applicable tax laws. Additionally, it is also a valuable means for photo identification for individuals, and it is acceptable by all government and non-government authorities within India. PAN allows the Income Tax Department to connect all transactions of the assessee with the department. Such transactions embody tax payments, TDS/TCS, return of income, correspondence, transactions specified by law, etc. It facilitates easy availability of data of assessee and matching of varied investments, borrowings, and other business activities of assessee.
It is also necessary for numerous other financial transactions such as the opening of bank accounts, transfer of immovable properties, dealing in securities, etc. Once the PAN number is obtained, it is valid for the lifetime of the PAN-holder throughout India and it is not affected by the change of address or change of Assessing Officer etc.
However, any change within the PAN data (i.e., details provided at the time of obtaining PAN) should be provided discreetly to the Tax Department by providing the data that is to be changed in the form for “Request for New PAN Card Or/And Changes Or Correction in PAN Data”.
All foreign administrations or persons engaged by the Indian subsidiary of a foreign-invested business are required to register for a PAN if they need to operate their company accounts, regardless of whether they are based in India or not.

3.Procedure for obtaining PAN?

The procedure to get a PAN is fairly easy and similar across all categories of individuals. However, in the case of NRIs, they are ought to provide certain documents while applying for a PAN, which is specified by law.

1.Forms

Person with citizenship of another country (foreign citizen) needs to fill Form 49AA for application of PAN and a person with citizenship of India (Indian Citizen) needs to fill Form 49A for application of PAN.

This form can be accessed easily, filled and submitted online through the websites of UTIITSL and NSDL.

On submitting the form, an acknowledgment copy with a 15-digit number is generated that must be sent to the designated address along with other specified documents.

2.Fees

The fee is decided on the basis of the address provided by the NRI, whether it is within India or if it is outside India.

3.Documents

In the case of foreign nationals, the address for an individual of foreign national and a duplicate of the subsequent documents must be notarized by the Indian Embassy in their home country:

Copy of Passport;
Person of Indian Origin card that is issued by the Government of India;
Overseas Citizen of India card that is issued by the Government of India;
Citizenship identification number or taxpayer-identification number;
Bank account statement within the country of residence;
Driving license;
A registration certificate issued by the foreign registration office showing an Indian address;
The appointment letter or contract from the Indian company, the original certificate of Indian address issued by the employer, and the Visa granted;

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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