As financial regulations tighten, many Non-Resident Indians (NRIs) are finding themselves in a challenging situation where their Permanent Account Numbers (PAN) have become inoperative. This issue primarily arises due to the non-linking of Aadhaar with PAN, which has created significant hurdles for NRIs in managing their financial and legal obligations in India.
Understanding Inoperative PAN
When a PAN becomes inoperative, it essentially means the holder cannot use it for any financial or legal transactions. Whether it’s buying or selling property, operating a bank account, managing a Demat account, or even applying for a lower Tax Deducted at Source (TDS) certificate, the inoperative status renders the PAN unusable. For NRIs, this also means they cannot file Form 15CA and 15CB—documents essential for repatriating funds out of India. The inoperative PAN status thus halts numerous essential activities, creating complications for individuals who rely on their PAN for smooth transactions.
Are NRIs Liable to Link Aadhaar with PAN?
One common question that arises is whether NRIs or non-citizens of India are required to obtain an Aadhaar number and subsequently link it with their PAN. The answer is straightforward: No. NRIs and non-citizens are not eligible to obtain an Aadhaar card, as Aadhaar is meant for residents of India. Consequently, they are not obligated to link Aadhaar with PAN.
However, despite this exemption, many NRIs face difficulties because their PAN becomes inoperative when the Aadhaar linkage is not completed. This situation arises from a lack of clarity in the implementation of regulations and the absence of seamless solutions for NRIs.
Challenges Faced by NRIs
The inoperative PAN issue has left numerous NRIs frustrated. Many have reported trying to resolve the matter by contacting helpdesks, sending emails to their jurisdictional income tax officers, and even escalating the issue through official channels. Unfortunately, the lack of favorable responses and prolonged delays only add to their difficulties.
We have seen cases where NRIs residing in countries like the USA, UK, and Canada, etc are repeatedly emailing their jurisdictional officers without receiving a resolution. This lack of response, coupled with the inability to access their financial assets, has caused immense inconvenience and anxiety among NRIs.
Resolving the Issue
When dealing with inoperative PANs, it is important to note that simply updating the residential or citizenship status on the income tax portal is insufficient. In many cases, the matter requires direct representation to the jurisdictional officer.
For NRIs looking to expedite the process, hiring a Chartered Accountant (CA) with experience in handling similar cases can make a significant difference. These professionals can represent the individual in person at the income tax office, which often speeds up the resolution process. While such cases typically take months to resolve, a professional’s intervention can reduce the timeline considerably.
Implications of an Inoperative PAN
Rule 114AAA of the Income Tax Rules outlines the consequences of having an inoperative PAN. These include:
- No Refunds: Any tax refund due under the provisions of the Income Tax Act will not be processed while the PAN is inoperative.
- No Interest on Refunds: Interest on any pending refunds will not be payable for the duration the PAN remains inoperative.
- Higher TDS Rates: Tax deducted at source (TDS) will be charged at higher rates as per Section 206AA of the Income Tax Act.
- Higher TCS Rates: Tax collected at source (TCS) will also be charged at higher rates as per Section 206CC.
These implications emphasize the urgency of resolving the inoperative status of a PAN to avoid financial and legal penalties.
Practical Steps for NRIs
To prevent and resolve the issue of an inoperative PAN, NRIs can take the following steps:
- Verify PAN Status: Check the status of your PAN on the income tax portal to ensure it remains active.
- Engage a Professional: Hire a CA who can represent your case effectively to the jurisdictional officer.
- Document Communication: Keep records of all emails, calls, and correspondences with income tax authorities as proof of efforts made.
Conclusion
The inoperative PAN status of NRIs is a pressing issue that requires immediate attention from both affected individuals and regulatory authorities. While NRIs are exempt from linking Aadhaar with PAN, the lack of a clear mechanism to address this exemption has caused unnecessary hardships.
Hiring a professional like a chartered accountant and maintaining proactive communication with tax authorities can help expedite resolutions. However, a more systematic approach by regulatory bodies is essential to address the challenges faced by NRIs effectively. Until then, NRIs must remain vigilant and take timely action to ensure their PAN remains operative and usable for all financial and legal purposes.
