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10/10/2022 |
It is well-known that all Indian citizens who fall under their income tax* slabs, based on their taxpayer category, are required to pay income tax* to the Government of India. There are set rules and regulations regarding income tax* payment and filing of income tax returns.
The taxes you claim when filing returns also depend on the investments made. For instance, purchasing a life insurance policy from any life insurance company in India enables you to enjoy tax* benefits on the policy premiums and the proceeds.
Even Non-Resident Indians or NRIs earning an income in India have to pay taxes in India, make certain investments, and claim tax* deductions on these investments. Hence, an NRI earning taxable income in India should have a Permanent Account Number (PAN) card. Here is what you need to know about NRI PAN cards and the TDS implications for NRIs who don’t have a PAN card.
Applicable TDS Rates for Non-Resident Indians
The tax* liabilities for resident Indian investors and Non-Resident Indian investors are the same; the only difference is that in the case of NRIs, the tax* is deducted at the source. The tax* treatment on investments of a resident Indian is calculated as per their income tax* slab.
For investments made by NRIs, the tax* deduction at source (TDS) deduction is calculated at a flat rate, and their income tax* slab is not considered. The taxes applicable on their financial gains are deducted when the investment is redeemed or reaches maturity.
If the tax* liability on an NRIs investment is not more than the TDS deduction on their investment, then one can file their income tax* returns at the Income Tax* Department of India. And to be able to file income tax* returns in India, an NRI taxpayer or investor is required to have a PAN card so that they can file their returns and avoid paying too much TDS.
In case an NRI does not have a PAN card, here is what they can do to avoid greater TDS rates on their investments. However, in the long run, having a PAN card is essential to make investments in a hassle-free manner.
Can an NRI Avoid Paying Too Much TDS?
By opening a Non-Resident External (NRE) account or a Foreign Currency Non-Resident (FCNR) account, an NRI can avoid paying a lot of TDS. Since these types of NRI bank accounts are entirely tax* free in India, an NRI does not have to pay any tax* for opening or maintaining any of these accounts.
For resident Indians, the bank deposits that earn an interest of more than ₹10000 are subject to TDS; but, for NRIs, this limit is not applicable.
Until 2016, under Section 206AA of the Income Tax* Act, it was mandatory for NRIs to have a PAN card to pay less TDS. This meant that not having a PAN card would have incurred more tax* deduction at source. However, this provision under the section has been amended, and now, a greater amount of TDS will be deducted for an NRI only under certain conditions, as given below:
- A Non-Resident Indian does not need to file tax* returns if their taxable income only comprises income from investments.
- If the NRI’s total income during the financial year is made up of only long-term capital gains, then these gains are exempt from tax*.
However, it is important that in both the above scenarios, the tax* deduction at the source should have been carried out.
Be it for investing in mutual funds, depositing funds in their accounts over a certain limit or wanting to purchase a property in India, it is necessary for an NRI to have a valid PAN card.
How Can an NRI Avail a PAN card?
If an NRI meets any of the following criteria, they will be able to apply for a PAN card online or offline –
- They have a bank account, either NRO or NRE, with any bank in India
- They have earned taxable income in India.
- They have or wish to have an investment in mutual funds.
- An NRIs have or wish to trade in shares through a broker/depository.
- They have planned to purchase a property in India and not only for trading.
Thus, the above criteria are necessary for applying for an NRI PAN card.
How to Apply for an NRI Pan Card?
Online PAN Application for NRIs:
- Visit the official TIN portal and click “Apply Online”.
- Go to “Application Type” and choose Form 49A if you are an NRI with Indian citizenship or Form 49AA if you are an NRI with foreign citizenship.
- Mention all the other details as required, enter the captcha code and click “Submit”.
- On the next page, fill in the NRI PAN card application form, upload the necessary documents, put your signature, and submit it.
- Complete the transaction on the payment page to receive an acknowledgement. This is a slip with a 15-digit number to help you check your application status.
Offline PAN Application for NRIs
- Go to the nearest IT PAN services centre/TIN facilitation centres like NSDL and UTI to procure your application form.
- After filling out the form correctly, provide your signature, attach copies of the necessary documents, and submit it.
- You can pay the fees for the NRI PAN card via demand draft (DD). Once the process is complete, you will receive an acknowledgement slip.
Conclusion
Like resident Indians, Non-Resident Indians must also file their tax* returns on time to avoid a penalty interest of 1% per month on the balance tax* to be paid. Moreover, a ₹5,000 penalty can be charged if an NRI does not file the returns within one year from the end of the financial year. Having a PAN card not only makes it easier for NRIs to file their tax *returns but also enables them to access several investment instruments such as the stock market, mutual funds, etc. Mutual fund investments can also help you, as an NRI, to save on the TDS payment at the end of the financial year.
L&C/Advt/2022/Oct/2427
