Although PAN-Aadhaar linking is not mandatory for NRIs (Non-Resident Indians), they need to update their residential status as an NRI on the Income Tax portal. Since, many NRIs failed to link their PAN and Aadhaar by 30th June and also did not notify the IT department about their NRI status, their PAN has become inoperative. In this blog, we will discuss the consequences of non-linking of Aadhaar with PAN card for NRIs. We will also discuss about the required steps to make their PAN functional again.
PAN-Aadhaar Linking for NRIs
The primary focus of PAN-Aadhaar linking was on domestic income taxpayers. It did not directly apply to NRIs as they are exempted from linking PAN with Aadhaar. However, their PAN card will become inoperative if they fail to update their status as non-resident on the IT portal. The Income Tax Department has made it compulsory for NRIs to update their residential status on the income tax portal, even if they have been filing taxes as non-residents for the past few years and have already been registered as NRIs with NSDL.
Consequences of Non-Linking of Aadhaar with PAN for NRIs
As per the press release, starting from 1st July 2023, the PAN of NRI taxpayers who have not linked their PAN with their Aadhaar and not updated their NRI status, will be considered inoperative. During the period when the PAN is inoperative, certain consequences will apply:
- NRIs may encounter difficulties accessing tax or banking services that require a valid PAN number when their PAN becomes inoperative. For instance, NRIs are not able to file their income tax returns (ITRs), thereby depriving them of tax refunds until their PAN is reactivated.
- NRIs will not able to apply for lower Tax Deducted at Source (TDS) certificates from the IT department. These provided NRIs with a means to mitigate the effects of high TDS rates (ranging from 20% to 30%) on activities such as rental income, property sales, and Non-Resident Ordinary (NRO) account transactions.
- Furthermore, the inoperability of their PAN cards has led to disruptions in processing mutual fund Systematic Investment Plans (SIPs). As per the Association of Mutual Funds in India (AMFI), investors with inactive PAN cards are not permitted to initiate new transactions in SIPs, systematic transfer plans (STPs), and systematic withdrawal plans (SWPs). Consequently, these investors may face rejection of redemption requests and be unable to claim their dividend payouts.
- An inoperative PAN can restrict an NRI’s ability to invest in various financial instruments, such as Fixed Deposits (FDs), mutual funds, and other investment options specifically available to NRIs through banks and financial institutions.
What should NRIs do when PAN Becomes Inoperative?
The Income Tax Department has provided an exemption to NRIs from linking their PAN with Aadhaar if they have already informed the department about their NRI status. If NRIs have not yet informed the income tax department about their NRI status, they should:
- Contact their Jurisdictional Assessing Officer (JAO) online to update their status in the PAN database.
- Additionally, NRIs need to submit supporting documents such as:
- a copy of their PAN card and
- a copy of their passport indicating the duration of their residence outside India.
Contact SBNRI
Due to the lack of resources or right information, NRIs may sometimes find it difficult to apply for a new PAN card or correct the information in the existing PAN. We at SBNRI, understand this struggle and are here to help you out with everything. You can get in touch with our expert directly on WhatsApp using the button below to resolve your doubts and queries. Also visit our blog and YouTube Channel for more details.
