Inoperative PAN IT dept asks NRIs to submit residential status proof
By, Admin
October 28, 2024
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The Indian Income Tax Department recently made a rule that has caused problems for NRIs and foreigners whose PANs became inactive because they didn’t link them with Aadhaar. Even though NRIs don’t need to link Aadhaar, many are still having issues. What’s going on, and how can NRIs fix this problem?
On July 18, 2023, the Income Tax Department tweeted that NRIs with inactive PANs should provide proof of their residential status to their local Assessing Officer (JAO) to reactivate their PANs. This is important because NRIs are not required to link their PAN with Aadhaar, unlike resident Indians.
We will break down the issue, explain why PANs have become inoperative, and provide a step-by-step guide on how NRIs can submit the required documents to resolve this.
What Is the PAN-Aadhaar Linking Issue for NRIs?
PAN (Permanent Account Number) is a unique ID for anyone doing financial transactions in India. The Indian government required all resident Indians to link their PAN with Aadhaar by June 30, 2023. If they didn’t, their PANs became inactive from July 1, 2023.
However, this rule does not apply to Non-Resident Indians (NRIs) or foreign citizens. Since NRIs and Overseas Citizens of India (OCIs) are not required to have an Aadhaar card, they are exempt from the PAN-Aadhaar linking requirement.
But why, then, are their PANs becoming inoperative? According to the Income Tax Department, there are two main reasons:
- Incorrect or Unupdated Residential Status: Many NRIs might have applied for their PAN while they were living in India and did not update their status to NRI after moving abroad.
- Failure to File Income Tax Returns (ITR): If an NRI has not filed their Income Tax Return (ITR) for any of the last three assessment years, their PAN could also become inactive.
Important Note: The Income Tax Department has clarified that NRIs must provide proof of their residential status and supporting documents to their local Assessing Officer (JAO) to correct their PAN status.
Why is PAN Important for NRIs?
For NRIs, having an operative PAN is vital for managing financial affairs in India. PAN is required for:
- Opening bank accounts in India
- Investing in the Indian stock market or mutual funds
- Selling or purchasing property in India
- Filing Income Tax Returns (ITR)
- Receiving rental income or other earnings from India
An inoperative PAN could severely limit an NRI’s ability to engage in any of these financial activities. Moreover, an inoperative PAN can also attract penalties.
Step-by-Step Guide: How NRIs Can Submit Proof of Residential Status to Make PAN Operative
If you’re an NRI whose PAN has become inoperative, you need to follow these steps to get it reactivated.
Step 1: Gather Required Documents
To submit proof of your NRI residential status, you will need to provide specific documentation. Here’s what you should collect:
- Copy of your passport (showing the immigration stamp and details of your stay outside India)
- Proof of address outside India (utility bill, bank statement, etc.)
- Form 30A (Declaration by an NRI that no Indian income other than what is specified is earned)
- Last ITR filed (if applicable)
Step 2: Identify Your Jurisdictional Assessing Officer (JAO)
Your Jurisdictional Assessing Officer (JAO) is the tax officer assigned to handle your case based on your residential status. You can find your JAO using the Income Tax Department’s portal at https://eportal.incometax.gov.in/iec/foservices/#/pre-login/knowYourAO
Simply enter your PAN details, and the portal will show you the contact information of your JAO.
Step 3: Submit Documents to Your JAO
Once you have the required documents, you can send them to your JAO. This can be done through:
- Postal mail: Send the documents to the JAO’s office address.
- Email: If your JAO’s office accepts digital submissions, email them the scanned documents.
Make sure that your submission includes a request to update your residential status in the PAN database.
Important Note: Without submitting this proof of residential status, your PAN will remain inoperative, affecting your ability to conduct financial transactions in India.
Step 4: Follow Up
It’s really important to follow up with your JAO to ensure your request is processed. Once your documents are verified, the Income Tax Department will update your residential status, and your PAN will become active again.
What Happens If You Don’t Update Your Residential Status?
If you fail to submit your residential status and supporting documents to the JAO, your PAN will remain inoperative. This means:
- You won’t be able to file your Income Tax Return (ITR)
- Transactions requiring PAN (such as property sales, stock market investments, etc.) will be blocked
- Bank accounts linked to PAN could face restrictions
- You may be subject to penalties and fines
To avoid these consequences, it is very important to act promptly and update your PAN status with the necessary proof of residential status.
Conclusion
For NRIs and foreign citizens, having an active PAN is very important for managing financial matters in India. Although NRIs don’t need to link their PAN with Aadhaar, many have found their PANs inactive due to incorrect residential status or not filing Income Tax Returns (ITR).
To fix this, NRIs should provide proof of their residential status to their local Assessing Officer (JAO) to reactivate their PAN. By following the steps in this guide and keeping your PAN details current, you can prevent unnecessary issues and penalties.
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