Tax Dept Inserts PAN Rule in Income Tax Returns for Investors

The latest rule made through the Indian tax council this year seems to become an issue for the foreign investors who pose sovereign funds as well as pension funds who invest in the country.

The same is made essential by the tax council for all the non-individual tax filers to mention the PAN number of the permitted signatories in the ITR including their signature. The tax expert suggests to the overseas funds mentioning that this need is affecting the structure of foreign portfolio investors (FPIs) as non-corporate trusts and association of persons (AOPs) in the largest manner.

Trustees and partners of overseas funds, who are foreign nationals, are just not interested to obtain a PAN card as this will convert them into an Indian assessee. There is indeed have a data privacy related to it since these foreign nationals will need to furnish their personal documents as a portion towards knowing your customer (KYC) needs. An email was sent to the income tax department yet has not been answered.

“Once you have a PAN card, you have to file IT returns every year irrespective of whether or not you have any reportable income in India,” mentioned a tax expert who concerns foreign funds.

Various foreign funds follow to move the CBDT asking for the privilege from the PAN needs. The funds are indeed followed to urge for postponement of furnishing the returns. The last date to furnish the ITR is 31st Dec.

Inside the non-corporates like trusts towards the funds, a permitted signatory can only be the trustee. Towards partnership companies, the partners of the fund house shall be the signatories.

“The requirement of a digital signature for uploading of the returns is causing challenges in the filing of the returns for non-corporate FPIs as the digital signature requires a PAN, mentioned by the tax expert.”

In the present times, there are above 10,000 registered FPIs in India, and industry that approximates nearly 40% of the FPIs enrolled in India are framed as a trust. There are some prominent sovereign funds and pension funds that are trusts indeed. The tax experts mentioned that the trustees of these are the top-ranking government council or chosen as an executive in their own countries.

The compliance challenges do not finish up with the trustee obtaining a PAN card. “If there are any discrepancies, the tax department will have powers to go after the PAN card holders brining personal liability into the picture,” was mentioned by the tax expert.

Towards the foreign fund’s as corporates, they hire domestic executives like lawyers as authorized signatories. It permits the domestic shows to sign the tax returns and laid in his PAN number.

“Directors of FPIs structured as corporates have been exempted from the need to get a PAN while signing the FPI tax returns,” said tax expert.