Despite the fact that NRIs are not taxed in India on their foreign income, they are required to file tax returns if they receive any interest income from NRO bank savings accounts or NRO fixed deposits, Rental income from property located in India or Capital gains by selling assets or shares, mutual fund units, and any other dividend income, Business income and consultation income from India. These incomes are irregular, hence NRIs are not usually required to file taxes every year. Recently many NRIs were unable to file income tax returns due to their inoperative PANs. Are you one among those whose PAN is still inoperable and searching for ways to fix it? Follow this blog to learn the process of activating your inoperable PAN.
When the PAN becomes inoperative?
In case if you fail to link your PAN & Aadhar before the 1st of July 2023 then the PAN becomes inoperative. Most of the NRI PANs got inoperative due to the non-linking of PAN and Aadhar and June 30 2023 was the last date for linking PAN and Aadhar.
According to Section 139AA (2), a person eligible to obtain an Aadhar Card must link it with his PAN card. It is not mandatory for NRIs to obtain an Aadhar card, hence it is not required for NRIs to link PAN with Aadhar. But the NRI who have an Aadhar card should link it with their PAN.
How to check the status of the PAN?
- To check the status of the PAN, Log in to income tax e-filing portal –https://www.incometax.gov.in/iec/foportal/
- Click on the “Verify Your PAN option”
- Enter the required details – PAN, Full Name, Date of Birth and Mobile Number
- Verify your mobile number with OTP and click on Validate.
After completing the above process, you will see whether your PAN is Active or Inoperative.
What happens when PAN is inoperative?
Most of the NRIs’ financial operations have been hampered because of their inoperative PAN cards. Inoperative PAN may lead to the following consequences;
- Delays in the processing of mutual fund systematic investment plans (SIPs) or Rejection of SIPs
- Rejection of Mutual Fund redemption
- An individual with an inoperative PAN cannot buy shares or bonds
- Individuals with inoperative PAN can file ITR but the outstanding refunds and interest on outstanding refunds will not be issued to inoperative PANs.
- Life insurance premiums will not be processed
- TDS/TCS will be deducted/Collected at a higher rate i.e., 20% – 30%
In order to avoid the above consequences, it is advised to link the Aadhar & PAN or update the residential status of an NRI with the IT department on priority ( if the NRI do not have Aadhar).
How to check PAN & Aadhar Linking Status?
Follow these procedures to see if whether your PAN and Aadhar are linked.
- Visit the official website of the Income Tax Department at “incometax.gov.in/iec/foportal/”
- Navigate to the “Quick Links” section and click on “Link Aadhar Status“
- Enter your PAN and Aadhar Card information.
- Select “View Link Aadhar Status” from the drop-down menu.
The status of the PAN-Aadhaar link will be displayed on the screen. If your PAN Card and Aadhaar Card are linked, the status will be reflected as “linked”, if not, it will provide you with instructions on how to link PAN & Aadhar.
How to link PAN & Aadhar?
You can activate your PAN by linking it to Aadhar, you can do so by notifying the prescribed authority and paying a cost of Rs.1,000. Refer to the link for detailed instructions for linking PAN & Aadhar – https://www.incometax.gov.in/iec/foportal/help/how-to-link-aadhaar
How to activate an inoperable PAN if an NRI has no Aadhar card?
In case if you are an NRI without an Aadhar card, then you need to submit an application through the mail with the IT department to change your residential status from Indian resident to NRI.
Income Tax Department has mapped NRIs’ residential status
- If they have submitted an ITR in the recent three fiscal years or
- If they have informed the Jurisdictional Assessing Officer (JAO) of their residential status.
If any of the aforementioned requirements is not met, the PANs are deemed inoperable.
NRIs whose PANs have expired/inoperative are asked to notify their respective JAO, along with supporting papers, and request to update their residential status in the PAN database.
NRI can apply for Aadhar card by visiting the nearest Aadhar Kendra in India. This is a physical process where the NRI has to visit the Aadhar Kendra and provide biometric information like fingerprints and digital photographs. Once the Aadhar is issued he can link it to PAN.
PANs of OCIs/foreign citizens who applied for PAN under resident status and have not corrected/updated their residence status to the Jurisdictional Assessing Officer (JAO) or filed ITR in the previous three fiscal years have been declared inoperative. OCIs/foreign citizens must notify their relevant JAO of their residence status, along with supporting documentation, and request that their residential status be amended in the PAN database. To find out who your Jurisdictional Assessing Officer (JAO) is, go to the e-filing home page and click on the “know your AO” button.
According to the Income Tax Department website, the following are the supporting documents required for making the NRI PAN operative:
- Copy of your PAN card
- Any one of the following documents:
- Copy of passport copy and documents supporting your past stay in India
- Copy of Person of Indian Origin (PIO) card issued by the Government of India
- Copy of Overseas Citizen of India (OCI) card issued by the Government of India
- Copy of other national or citizenship Identification Number or Taxpayer Identification Number duly attested by “Apostille” (in the case of countries that have signed the 1961 Hague Convention) or by the Indian Embassy or High Commission or Consulate in the country where the applicant is located or authorized officials of overseas branches of Scheduled Banks registered in India
How long does it take to alter the PAN’s residence status?
Once the jurisdictional assessing officer is satisfied with the information provided by the taxpayer, the procedure of changing the taxpayer’s status from resident to NRI will begin. The process may take up to 30 days from the receipt of all information if the officer is satisfied with all the information provided. However, the time frame may differ from case to case basis.
This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.
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