Any individual, company, non-resident Indian, or entity that pays taxes in India must have a permanent account number (PAN). Non-taxpayers and foreign nationals may also be issued a PAN under certain conditions.
Using an electronic system, all the tax-related transactions and details are stored in a secured database for future tax calculation and evaluation. After getting a PAN allotted, you may also apply for a hard copy of PAN card, which will be delivered to the address provided. If you are planning to apply for a PAN, read on to familiarize yourself with all the intricacies of the process and benefits associated with it.
What is PAN?
PAN is a unique 10-digit alphanumeric code issued to all tax paying individuals/entities in India as well as some non-taxpayers and foreign nationals if they meet the conditions issued by the government.
The first five and the last character in PAN are letters while the remaining four are numeric digits. It is imperative to mention PAN whenever financial transactions above certified limits take place. This helps maintain a transactional history, which can be used to process the tax dues of the individual in the future.
Types of PAN Cards
It is not necessary that PAN shall only be issued to taxpayers, as other entities are also offered to apply for the same based upon certain conditions. As such, PAN cards are used for different purposes depending upon the individual/entity they have been issued for. The four major categories for which PAN is issued are:
- PAN Card for Indians
- PAN Card for Foreign Nationals
- PAN Card for Indian Companies
- PAN Card for Foreign Companies
PAN cards issued to individuals carry the name, father’s name, photograph, date of birth, date of when the PAN was issued, QR code, signature, permanent account number, and authenticity hologram. On the other hand, PAN cards issued to companies only have the company’s name, registration date, permanent account number, QR code, authenticity hologram, and the date when the PAN was issued. There is no signature or photograph on the PAN issued to companies.
PAN: Eligibility, Cost & Validity
While the common misconception is that a PAN can only be issued for a taxpayer or an Indian citizen, we will help you understand exactly who is eligible for it under Section 139A of the Income Tax Act, 1961.
When it comes to who exactly can have PAN; they are:
- Any individual that has paid or is liable to pay taxes according to the tax slabs set by the Income Tax Department.
- Every type of company, trust and charitable organization.
- Any importer or exporter that is liable to pay any type of duty charge or tax as per any law.
- Any individual that runs a business or has a professional practice that yields a turnover of more than INR 5 lakhs in any assessment year.
- Minors: Forms shall be filled in and attested with the necessary documents by their parents.
| The total cost of applying for a PAN is INR 93 (excluding GST) for delivery of the card anywhere in India, and INR 864 (excluding GST) for delivery anywhere outside of India. |
| PAN cards are unique numbers issued to applicants & have lifetime validity. |
Need for PAN
PAN plays a crucial role in several legal procedures like tax payments and is used to record all the transactional details of the cardholder in one place in the government’s database. PAN can be used for:
- Proof of Identity,
- Proof of Address,
- Financial Transactions such as loans, etc.
- Paying Taxes,
- Filing Returns,
- Mutual Funds,
- Business Registration, and more.
Why do Foreign Companies and Foreign Directors Need PAN?
All foreign companies wishing to establish themselves in India must apply for a PAN card to ensure compliance with taxes and other financial transaction rules and regulations thereto. When applying for a PAN card, foreigners are required to fill out Form 49AA and submit it along with the required documents. They mainly need PAN for:
- Filing of the Tax Return in India.
- Filing the Form 10F in India.
- Filing for the Income Tax Refund in India.
- Filling for the Withholding Tax Certificate in India.
- Claiming the benefit of the Income Tax Treaty between India and foreign countries.
- Any other correspondence with the Income Tax Department.
- Receiving Royalty income fees for technical services from Indian entities
- Receiving Interest income from Indian entities
According to a circular issued by the Ministry of Corporate Affairs in 2014, it was clarified that only foreign nationals who are mandated to hold a PAN under the provisions of the Income Tax Act, 1961 on the date of application shall be required to carry a PAN.
Further, the person not holding a valid PAN is liable to a higher withholding tax rate of 40% instead of the lower beneficial rates of 5%/10%/20% under the tax laws.
In instances where foreign directors are not required to hold a PAN, they can simply provide their passport number along with a declaration stating that they are not legally required to hold a PAN under the provisions of the Act.
Foreign companies and foreign directors are required to hold a PAN in certain cases such as:1. Investing in any funds or other companies in India.
2. Purchasing properties or selling immovable properties.
3. Buying or selling shares or bonds in India on a stock exchange or unlisted company’s shares valued at greater than INR1 lakh.
4. Employment-related purposes, etc.
5. Obtaining loan from any bank or financial institution.
6. Purchasing foreign currency amounting to INR50,000 or higher.
As such, any non-resident who does not indulge in any financial transaction in India is not required to possess a PAN.
To broaden the tax base and use PAN as a Unique Entity Number (UEN) for non-individual entities, PAN was made mandatory for all entities doing financial transactions of INR 250,000 or more by the provisions of the Finance Act, 2018. Even in cases where an individual or entity may not be required to hold a PAN, banks have made it compulsory to have one if any entity wants to open a bank account.
The law now requires that a managing director, director, partner, trustee, founder, or any other individual who has the authority to act on behalf of such entities must also file an application for PAN. Further, any non-resident individual who is a director of such entities must also apply for a PAN, irrespective of whether they have any financial dealings in India.
Who will file ITR on behalf of the Company?
As per Section 140 of The Income Tax Act, 1961, the return filed under section 139 is required to be verified by the managing director of a company, or if a managing director is not able to verify the return, or where there is no managing director, by any director of the company.
If a company is not resident in India, the return may be verified by a person who holds a valid power of attorney issued by such company and authorized to do so, the same shall be attached to the return of income.
Section 160 of the Income Tax Act, 1961 states that an individual who acts as the legal representative on behalf of another person under the Income Tax Act is considered a representative assessee. Details of the representative assessee have to be provided in item 14 of the application for PAN. Proof of Identity and Proof of address is also required for the representative assessee.
| Note: According to the CBDT guidelines, non-residents can be the authorized signatory and file ITRs on behalf of the entity without a PAN-encrypted Digital Signature Certificate (DSC). |
While updating the Principal Contact details in the profile, the PAN field might not be available. This may be potentially due to the fact that the previous Principal Contact was a non-resident without a PAN and might have been added as an exception case in the e-filing application.
To change this, you are required to send an email to
efilinghelpdesk@incometaxindia.gov.in while attaching details like the company’s name, company’s PAN, date of incorporation, name of the principal contact, and the date of birth of the principal contact.
You must use a dummy PAN (ABCFA3454B) when filling the verification field.
| Note: Dummy PAN can only be used for verification field. DSC with a dummy PAN is not acceptable. |
Duties, Responsibilities & Role of Representative Assessee
The principal responsibility of the assessee is to pay taxes and file the return of income on time for each assessment year. If the user does not submit income tax returns on time, an inquiry may be issued as to why the tax returns were not submitted or were submitted late. If the assessee receives such a notice from the tax authority, they must file a response and follow the instructions below:
- After receiving the notice from the Tax Department, an assessee should file income tax returns for the relevant assessment year.
- The assessee must submit details relevant to their income returns within 30 days of the date of issuance of the notice.
The duties and obligations of a representative assessee, which are the same as those of a normal assessee, are summarized above.
Liabilities of Representative Assessee
- According to the Income Tax Act, every representative taxpayer is liable for assessment in their name for the revenue they are found to be a representative assessee.
- The tax is assessed and recovered from the representative assessee similarly and to the same extent as levied and reclaimed from the principal assessee.
- The representative assessee's liability is personal, and it depends on the assets in possession.
- Although the money in question was advantageously received in their favor, the representative assessee is liable for all obligations, duties and liabilities.
- The liability of representative assessee's can be reduced by obtaining a certificate from the Assessing Officer stating their anticipated obligation.
- The principal assessee and the representative assessee have the same responsibilities, liabilities, and obligations. Hence, the representative assessee is also responsible for the accounting and getting the books of accounts audited.
Documents Required to Apply for PAN: For Foreign Companies & Foreign Directors
For any foreign company or foreign applicant seeking to apply for a PAN card in India, the process involves filling up Form 49AA and submitting it along with mandatory documents for verification.
| Category |
Foreign Company |
Foreign Director |
| Identity Proof and Address Proof |
1. Copy of 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
2. Copy of registration certificate issued in India or of approval granted to set up office in India by Indian Authorities. |
1. Copy of Passport, or
2. Copy of Person of Indian Origin (PIO) card issued by Government of India, or
3. Copy of Overseas Citizen of India (OCI) card issued by Government of India, or
4. Copy of other national or citizenship Identification Number or Taxpayer Identification Number 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,
Following other documents can also be used as address proof
1. Copy of Bank account statement in the country of residence, or
2. Copy of Non-resident External (NRE) bank account statement in India, or
3. Copy of Certificate of Residence in India or Residential permit issued by the State Police Authorities, or
4. Copy of Registration certificate issued by the Foreigner’s Registration Office showing Indian address, or
5. Copy of Visa granted & Copy of appointment letter or contract from Indian Company & Certificate (in original) of Indian address issued by the employer. |
How to Apply for PAN?
Foreign companies can apply for PAN through any of the two available methods – online or through PAN Application Center. Here are how the two methods can be used to apply for a PAN card:
1. Online Application
2. Through PAN Application Centre
- Get a PAN application form from an authorized PAN Centre.
- Fill up the form and attach the required documents.
- Submit the form and pay the processing fee.
- PAN will be delivered to the mentioned address.
Dos & Don’ts for PAN Applications
Here are a few dos and don’ts that foreign companies must adhere to when applying for a PAN card:
- The form must be filled out in block(capital) letters.
- Make sure all required sections are filled with mandatory details.
- Ensure the form is only filled with the current and relevant information.
- No salutations like Mr., Mrs., Ms., Dr., etc. should be used.
- Make sure the address entered is accurate as the PAN card will be delivered to the address mentioned.
- Attach clear copies of all required documents when filing, as illegible documents might result in verification failure and lead to issues with the application process.
- Make sure to attest the attached documents clearly with your signature and name.
How to Edit/Update PAN Details?
Adhere to the following steps to edit or update your PAN details:
- Visit the UTIITSL website and select ‘Update PAN’.
- Click on ‘Change/Correction in PAN Card’ in existing PAN data.
- Next, select ‘Apply for Change/Correction in PAN Card details.’
- Enter details that need to be updated.
- Submit the form and pay the processing fee.
- PAN will be delivered to the mentioned address.
Lost PAN Card
In case you lose your PAN card, you can apply for a duplicate one both online and offline. Fill up Form 49AA, make the payment and submit it for a duplicate. The PAN will be dispatched to the address mentioned on it within 45 days
How to Check PAN Application Status?
Irrespective of whether you have applied for a new PAN or requested for some changes/corrections, you can easily track your application using the Acknowledgement Number provided at the time of form submission. Here’s how you can track your PAN application:
Penalty for Duplicate/Multiple PAN Cards
As per Sub-section 7 to Section 139A of the Income Tax Act, 1961, a person who has already been allotted a Permanent Account Number is not entitled to apply for, obtain or have another permanent account number.
According to Section 272B of the Income Tax Act a fine of INR 10,000 is imposed upon failure to comply with Section 139A. Moreover, any person when asked to quote their Permanent Account Number quotes a false Permanent Account Number will be fined by the tax officer.
Conclusion
PAN is a crucial document that helps the Government keep track of the transactional records and tax paid by taxpayers as well as of potential tax evasions. It is imperative for foreign companies to apply for a PAN if they wish to open a subsidiary in India.
If you are a foreign company with PAN issues or related queries, we can assist you. You can get in touch with us by submitting a query below.
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