The Income Tax Department has recently issued clarifications through a tweet, dated 18/07/2023, addressing concerns raised by certain Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) regarding their inoperative Permanent Account Numbers (PANs). Despite being exempt from linking their PANs with Aadhaar, some NRIs and OCIs have faced issues with the inoperability of their PANs. Additionally, PAN holders who have not linked their PANs with Aadhaar have expressed concerns about the consequences of having an inoperative PAN. Let’s understand the key aspects of the clarifications provided by the Income Tax Department in this regard:
1. Residential Status Mapping for NRIs
The Income Tax Department has mapped the residential status of NRIs based on two criteria:
i) Filing the Income Tax Return (ITR) in any of the last three Assessment Years (AYs).
ii) Intimating the residential status to the Jurisdictional Assessing Officer (JAO).
If NRIs fail to meet either of these criteria, their PANs are rendered inoperative. To address this, NRIs with inoperative PANs are requested to inform their respective JAO about their residential status. Supporting documents should be provided along with the request to update the residential status in the PAN database. Details of the JAO can be found at:
2. Inoperative PANs for OCIs and Foreign Citizens
OCIs and foreign citizens who have applied for PAN under the resident status and have not corrected or updated their residential status with the Jurisdictional Assessing Officer (JAO) or have not filed ITR in any of the last three AYs, will have their PANs rendered inoperative.
Similar to NRIs, OCIs and foreign citizens with inoperative PANs are requested to intimate their residential status to the respective JAO. Supporting documents should accompany the request to update the residential status in the PAN database. Detailed information about the JAO can be found at:
3. Understanding Inoperative PANs and Consequences
It is important to note that an inoperative PAN does not mean it is inactive. Taxpayers can still file their Income Tax Returns (ITR), irrespective of their PAN status.
However, certain consequences arise from having an inoperative PAN, as listed here-under:
i) Pending refunds and the associated interest will not be issued for inoperative PANs.
ii) Tax Deducted at Source (TDS) will be deducted at a higher rate for inoperative PANs, in accordance with section 206AA.
iii) Tax Collected at Source (TCS) will be collected at a higher rate for inoperative PANs, in accordance with section 206CC.
For detailed information on these consequences, refer to the CBDT Notification 15/2023 dated 28th March, 2023.
The recent clarifications provided by the Income Tax Department address concerns raised by NRIs and OCIs regarding the inoperability of their PANs, despite being exempt from linking their PANs with Aadhaar. By understanding the mapping of residential status for NRIs and the requirements for OCIs and foreign citizens, individuals can take the necessary steps to update their residential status in the PAN database. Although an inoperative PAN does not affect the filing of ITR, it does have consequences related to pending refunds, TDS and TCS. It is crucial to stay informed and comply with the guidelines prescribed by the Income Tax Department.
CA Abhinav Aggarwal is a qualified Chartered Accountant and ICAI member since 2010. He holds vast experience in Audit, Income Tax & GST and is a passionate writer on the CA profession and related topics.
Disclaimer: While reasonable efforts have been made to ensure the accuracy and reliability of the information presented in this article, it should not be considered as professional tax advice or guidance. For compliance, the readers are advised to directly refer to the relevant laws, regulations and notifications issued by the appropriate authorities.