India has a rather complicated taxation system both for residents and non-residents. An individual’s residential status dictates the amount of taxes to be paid to the government and the type of investments he can venture into. According to the existing Indian laws, one is considered a resident if living in the country for about 182 days. But this article will focus on non-resident Indians (NRI).
According to India’s Income Tax Act, an NRI refers to any individual who has been domiciled in any nation other than India to work, handle a transaction or business, or expressed his intention to stay abroad for different reasons. An Indian citizen remains a citizen provided that he has lived in the country for about 182 days, between April 1 and March 31 of the following year.
The requirement is provided for by Section 6 of the Income Tax Act as well as the Foreign Exchange Management Act, the country’s regulatory law. Those who left India to work abroad can only be called a resident if he stays in the country for at least 182 days during a financial year being accounted. It specifically applies to the following:
- Indian crew members who are/will be working for foreign ships, regardless of where the vessel is/will be deployed.
- Seafarer working for Indian ships that will sail beyond the nation’s jurisdiction is usually a non-resident. But tax rules created in 1990 explicitly states that those working in a ship deployed locally is counted as a period of service.
NRIs are given various investment opportunities in India under current laws. Not only they do not need to pay applicable taxes, but also they can sustain their basic needs, build a financial portfolio to grow their wealth, earn money from investing in various commercial vehicles, and prepare for retirement. Types of investment include mutual funds, bonds, non-convertible debentures, a bank account with a fixed deposit, equity or stocks, real estate, government securities, and pension accounts.
Why PAN Card is Necessary
Given this scenario, it makes sense for any non-resident to open an all India Permanent Account Number (PAN) Card. Above all else, an NRI has to file an income tax return to India’s Department of Revenue, provided that the earned income is subject to existing tax laws. Non-residents must remember that countries across the world have different taxation schemes.
The PAN Card is akin to a credit card that can be obtained from the Central Board of Direct Taxes (CBDT). The Indian government, through the concerned agencies, can govern the financial transactions and immigration activities of its holders, allowing them to track the compliance of PAN Cardholders to Indian rules and regulations as well as to detect any wrongdoing on the onset. The PAN Card also seeks to bring a distinct identification to every cardholder that is valid for a lifetime.
Individuals with significant net worth are mandated to get a PAN Card. It also allows them to avail of any financial services offered by India. These include opening a bank account or Demat account; depositing or withdrawing money greater than 50,000 Indian rupees; applying for a debit or credit card, loan, passport or visa, and foreign remittance; receiving a taxable income; selling and/or buying a property or other assets; and trading in the Indian stock market. It also covers NRIs who send money to their loved ones back home.
How to Apply for PAN Card
Here are the following steps for getting a PAN Card.
- Fill out and submit an online application to the CBDT’s website.
- An applicant will receive his 15-digit acknowledgment number. It is a combination of alphabets and numbers (the first three characters are alphabetic series, the fourth character denotes the application status, the fifth one is the first letter of the applicant’s surname, the next four characters are a sequential number, and the last digit is an alphabetic check digit).
- Store the number that serves as his reference number to track the status of his application.
- Print a copy of the application form and sign it. Also, attach two passport-sized photos in the provided space in the way.
- Prepare the necessary documents. Send the forms and papers as well as passport photos to this address:
Income Tax PAN Services Unit, NSDL e-Governance Infrastructure Limited, 5th floor, Mantri Sterling, Plot No. 341, Survey No. 997/8, Model Colony, Near Deep Bungalow Chowk, Pune 411016
The envelope must be labeled as “APPLICATION FOR PAN (plus acknowledgment number provided in the online application)”
To push through with the PAN Card application, a non-resident must pay a processing fee of 105 Indian rupees. The fee may go up to 971 rupees if the application is facilitated in a country other than India. It can be settled online (credit card, debit card, or money transfer) through the country’s Income Tax Department.
“As per RBI guidelines, the entities making e-commerce transactions are required to provide PIN (Personal Identification Number) while executing an online transaction. Therefore, before making payment for online PAN/TAN applications using credit card / debit card / net banking, the applicant is required to obtain a PIN from Banks whose credit card/debit card/net banking is being used,” the Income Tax Department stated in its official website.
The concerned government agency will handle the PAN Card application upon payment of the processing fee and submission of the complete requirements, which generally take a few months depending on the volume of applications that they are handling.
It is vital to provide correct details on the online application form. Any missing information on the way may cause authorities to reject an NRI’s application. It also pays to lodge their application in advance to avoid inconveniences in the future. Once the PAN Card application is approved, the non-resident may receive his physical card for an extra few weeks.
The Indian government requires all non-residents to secure a PAN Card to strengthen its supervision on their financial and immigration activities and curb instances of illicit acts in the future.