The income-tax department has amended the procedure for obtaining a Permanent Account Number (PAN). The amendments, applicable from November 1, will impact foreign nationals and Indian citizens living abroad.
Previously, both Indian citizens and foreign nationals were required to apply for PAN through a common application form, that is, 49A. Now, two separate application forms have been prescribed. While Indian citizens (living in or outside India) would still be required to fill up Form 49A (with a few minor modifications), Form 49AA would now cater to foreign nationals.
Earlier, PAN was mandatory when the individual?s total income as per the I-T Act exceeded the maximum amount not chargeable to tax or where the gross receipts from business were likely to exceed R5 lakh in any financial year. Now, in addition to the above criteria, any person entitled to receive any income on which tax is deductible in India, would also be required to apply for PAN.
Note that as per the Act, a higher withholding tax is applicable to non-PAN holders.
The new rules have widened the gamut of options with respect to documents that could be submitted with the PAN application for identity and address proofs. In case of foreign national, a copy of the passport, person of Indian origin card or overseas citizen of India card may be submitted. A copy of any other national/citizenship or taxpayer identification number may also be given, provided it is attested by the Apostille or the Indian Embassy/High Commission/Consulate in the country of residence.
With respect to address proof, a copy of the bank statement in the country of residence/non-resident external account in India/certificate of residence in India/ residential permit/foreigner?s registration office certificate, visa/Indian contract and letter from Indian employer certifying Indian address will also be accepted. Also, in case of an Indian citizen residing outside India, a copy of the NRE account statement in country of residence or a copy of bank account statements could now serve as a proof of address.
The new Form 49AA may also double up as know your customer (KYC) compliance. Foreign nationals (qualified foreign investors) who want to invest in India have to obtain a PAN and also, separately, meet the KYC norms prescribed by Sebi before making any investments. Form 49AA seeks to obtain the KYC information through the PAN form itself, which should be usable by the investee companies. Though there?s not enough clarity on this, a foreign national may be relieved of the KYC compliance to some extent with this new PAN form.
The above amendments underline the importance of obtaining a PAN in India.
The writer is executive director, KPMG