“Synopsis”
For Non-Resident Indians (NRIs), a PAN (Permanent Account Number) card is not just a formality but an essential document for managing financial and tax matters in India. Without a PAN, NRIs face a higher TDS (Tax Deducted at Source) rate of 20% under Section 206AA, which impacts investments, property sales, and other income sources in India. This blog explains why NRIs need a PAN card, the consequences of not having one, and a step-by-step guide to applying for PAN from outside India.
Why Do NRIs Need a PAN Card?
1. Avoid Higher TDS on Income
According to Section 206AA of the Income Tax Act, if an NRI does not quote their PAN, the tax deducted on income such as interest, dividends, rent, or property sales is at a flat rate of 20%, which is higher than the usual rates under DTAA (Double Taxation Avoidance Agreement).
2. File Income Tax Returns in India
If you earn taxable income in India, filing income tax returns is mandatory. PAN is a prerequisite for filing returns and claiming refunds or tax credits.
3. Investment and Financial Transactions
NRIs require PAN for:
-
Buying or selling property
-
Investing in mutual funds, stocks, or IPOs
-
Opening NRE, NRO, or FCNR accounts
-
Depositing cash exceeding ₹50,000 in banks
4. Compliance with Indian Law
PAN is mandated by the Income Tax Department to track financial transactions and prevent tax evasion.
Consequences of Not Having a PAN Card for NRIs
-
Higher TDS Rates: Without PAN, TDS on interest or capital gains is deducted at 20% instead of the lower applicable rates.
-
Rejection of Investment Transactions: Banks and financial institutions may reject applications for investments or property registration without PAN.
-
Complications in Filing Returns: You cannot file tax returns or claim refunds without PAN.
-
Penalties: Non-compliance may invite notices or penalties from tax authorities.
How Can NRIs Apply for PAN from Abroad?
Step 1: Choose Application Mode
NRIs can apply for PAN online through portals authorized by the Indian government, such as NSDL or UTIITSL websites.
Step 2: Fill Form 49AA
Form 49AA is specifically for foreign citizens and NRIs applying for PAN. It requires personal details, proof of identity, address, and date of birth.
Step 3: Submit Supporting Documents
Valid proof documents for NRIs include:
-
Passport (mandatory)
-
Overseas address proof (e.g., bank statement, utility bills)
-
Recent photograph
Step 4: Pay Application Fees
Fees vary depending on the address type (Indian or foreign). Payments can be made online via credit/debit cards, net banking, or demand draft.
Step 5: Send Physical Documents (If Required)
Some service providers require sending physical copies of documents via courier to the PAN processing center.
Step 6: Track PAN Application
Applicants can track the status online until PAN is dispatched to their overseas address.
Tips for NRIs on PAN Management
-
Keep PAN details updated with the Indian tax department.
-
Link PAN with Aadhaar if you become a resident again.
-
Always quote PAN in financial and tax-related transactions.
-
Avoid using someone else’s PAN to prevent legal issues.
Conclusion
A PAN card is indispensable for NRIs dealing with income or investments in India. It not only helps in avoiding higher TDS rates under Section 206AA but also simplifies tax filing and financial compliance. NRIs should apply for PAN well in advance to enjoy smoother transactions and tax benefits. Applying for PAN from abroad is straightforward with online portals, and following the proper steps ensures hassle-free processing.
