Benefits of PAN Card – Overseas Citizen of India

by Whytecroft Ford | Apr 22, 2023 | Indian Law, Indian Law Weekly Round-Up, NRI Legal Services, OCI, PAN, Power of Attorney, Taxation

This segment details the benefits of PAN Card for an Overseas Citizen of India or a Foreign Citizen. The Permanent Account Number which is commonly known as PAN, is imperative to certain financial activities carried out in India.

If you do not hold a PAN, your financial activities in India may experience delays.

Before we move ahead, here are a handful of 5 facts about the PAN in no specific order;

Once issued PAN does not have an expiry date.

From 30 June 2023, if your PAN is not linked to your Aadhaar it will be inoperative.

NRI ‘s & Foreign Citizens are now exempt from linking Aadhar PAN as announced in recent guidelines.

The Fifth character of PAN represents the first character of the PAN holder’s last name/surname (Individual).

The fourth letter in a Permanent Account Number represents the status of a PAN holder. “P” stands for Individual.

PAN is mandatory in Sale or purchase of any immovable property for an amount exceeding Rs. 10 lakh or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.

As can be seen from the select 5 facts above, the PAN is mandatory for transactions related to immovable property. For a Foreign Citizen, this is one of the main reasons across the board why PAN has become necessary to obtain.

Continuing, let’s consider what related activities or as the Government of India details, the “utility” of your PAN. Below you can see a table detailing activities around PAN in relation to the areas in which it is used.

For example, filing your income tax return.

Type Of Activities – Benefits of PAN Card

Tax payments	TDS/TCS credits	Returns of income	Specified transactions	Correspondence
Facilitates easy retrieval of information of assessee	Matching of various investments	Matching of various borrowings	Business activities in India	Correct rate of taxation

Section 139 – Return of Income

In relation to the benefits of PAN Card, it makes the return of income tax filing more efficient. You only need to file an income tax return if you fall under any of the guidelines under Section 139 of the Income Tax Department.

Section 139 details the rules and regulations by the Income Tax Department, Government of India that provides a procedure for assessment for filing returns. This assessment defines whether or not income tax should be filed by you or your representative in India. This depends on the income bracket for that year accordingly.

If you are a beneficiary of an asset in India in a given financial year, even if you are an NRI or a Foreign Citizen, you may need to file returns in relation to the asset. For the purpose of a better understanding, below we have elaborated on the Government of India’s definition of the term – “beneficiary” (specifically related to an asset).

Beneficiary – Benefits of PAN Card

The Income Tax Department guidelines define a “beneficiary” in terms of an asset in India as follows;

For the purposes of this section “beneficiary” in respect of an asset means an individual who derives benefit from the asset during the previous year and the consideration for such asset has been provided by any person other than such beneficiary.

The latter part of this article details the benefits of PAN Card. Specifically, in six key points.

As a Overseas Citizen, Foreign Citizen or an NRI your financial interests in India are likely to overlap a number of the these activities.

Also, you can find mandatory areas in which your PAN Card will be required. This means that without a PAN Card you cannot carry out those activities. For example, in some cases, bank accounts may be on hold pending your PAN Card number.

PAN and Indian bank account requirement is a frequent occurrence for Overseas Indians.

1. Appropriate Rate of TDS – Benefit of PAN Card

Without a PAN, the Government of India clearly advise that a higher rate of Tax Deducted At Source rate will apply. In Countries of the European continent, such as the United Kingdom, a similar regulatory parameter is set by HMRC under the Government of the United Kingdom. I.e. it is popularly known as emergency tax or BR tax code which is a temporary tax code at a much higher rate.

Specifically, “from 1st April, 2010, non-furnishing of PAN to deductors results in TDS at much higher rate of 20% or even more.”

With your PAN you will receive benefit in relation to the set allowances of personal tax according to the Government of India.

An example for the new Tax Slabs for AY 2022-23 with a PAN Card

Income Slab	Income Tax Rate
Above ₹ 15,00,000	₹ 1,87,500 + 30% above ₹ 15,00,000

Benefits of PAN Card - Overseas Citizen of India — Benefits of PAN Card – Overseas Citizen of India

2. Bank Accounts

The second point of benefit in PAN Card is for Indian banks. For PAN Card holders, you can fairly easily open a new NRO or NRE account provided you have all documents required.

Where you do not have a PAN, the bank may not be able to activate the account for use albeit your application may remain on hold until due formalities are provided.

PAN will also be required for your KYC whether you are an existing account holder or a new client of the bank wishing to open a bank account.

3. Demat Account

Thirdly, you need a PAN to open a Demat Account. Demat is the short term of dematerialised securities, referring to digitally traded stocks and shares as well as holding digital financial securities. To open a Demat account for trading India stocks and shares you benefit from holding a PAN. Without PAN an account may not be activated.

There are three types of Demat accounts. Demat account opening is subject to KYC.

4. Immovable Property Transaction

The Fourth key point and perhaps one of the most common amongst Overseas Indians is Indian property and other immovable assets such as; residential and commercial property in India.

In relation to sale or purchase of an immovable asset a PAN is required. For inheritance and gifts the same applies. You will benefit if you hold a PAN for your immovable asset(s) in India. It can avoid unnecessary delays to your matters when the need arises.

5. Securities

For our fifth key point, dealing in securities etcetera.

Indian securities predominantly deal with primary and secondary markets. PAN is required to deal in securities. Securities mainly deal in equity finance.

6. Photo Identification

The final key point. PAN card is a valuable means of photo identification. PAN is accepted by Government and non-Government institutions in India.

To conclude, for an Overseas Citizen of India, Foreign Citizen or NRI, PAN is important for your financial activities. If you hold assets in India, you are better equipped with a PAN.

If you need assistance with your PAN application or to update your existing PAN, we can assist – Application Assistance Services. PAN E-Guide.