Though income tax (I-T) laws in India have exempted non-residents from getting PAN under certain conditions, a recent notification by the Central Board of Indirect Taxes (CBDT) might change that for some non-residents. Permanent Account Number (PAN), which has become an integral component for financial dealings for Indian taxpayers, is seen as a cumbersome registration requirement by non-residents doing business in India. PAN Card New Rules for non-residents doing business in India.
The provision was amended to provide relaxation from mandatory furnishing of Permanent Account Number (PAN) with respect to payments like interest, royalty, fees for technical services (FTS), dividends, or on the transfer of capital assets, subject to furnishing prescribed details such as name, e-mail id, contact number, address, tax residency certificate (TRC) and Tax Information Number (TIN) in the country of residence.
The Finance Act, 2009 had mandated the deductee to furnish PAN to the deductor, irrespective of the residential status, failing which the deductor will have to deduct tax at a higher rate of 20%. This move caused compliance hardships, especially regarding payments to non-residents that were infrequent and governed by relevant tax treaties. Non-residents are exempted from filing returns of income in India where their total income consists only of interest, royalty, FTS or dividend income from India and appropriate taxes are withheld on such income as per provisions of Indian income tax laws.
They need not file returns in India in cases where beneficial provisions or tax rates under tax treaties are availed. IT rules mandate quoting PAN in notified transactions, such as the opening of bank or demat account, acquisition of debentures or bonds, sale or purchase of securities, unlisted shares, mutual fund units, etc., beyond prescribed monetary threshold limits.
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Non-residents, including foreign companies, also fall within the ambit of these transactions. Accordingly, resident taxpayers must disclose the PAN of parties involved in such transactions in the annual reporting of specified financial transactions (Form 61A), re-emphasising the need to obtain PAN by non-residents who are parties to such transactions.
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