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Foreign directors of Indian companies are required to obtain Permanent Account Number in India by 31 May 2019

All directors of Indian companies mandatorily have to obtain Permanent Account Number (PAN) irrespective of whether such directors have financial, transaction in India or not. The last date to obtain PAN is 31 May 2019.

Directors are required to obtain DIN (Director Identification Number) prior to their appointment in Indian companies. It is mandatory for Indian nationals to quote PAN while obtaining DIN. However, foreign nationals could obtain DIN without PAN.

Background of the amendment

Section 139A of the Income Tax Act, 1961 was amended by Finance Act, 2018. One of the initiatives announced through 2018 Budget under measures to widen and deepen tax base was to make PAN mandatory.

The memorandum to Finance Act 2018 had the following explanation

In order to use PAN as Unique Entity Number (UEN) for non-individual entities, it is proposed that every person, not being an individual, which enters into a financial transaction of an amount aggregating to Rs. 250,000 ($3,500) or more in a financial year shall be required to apply to the Assessing Officer for allotment of PAN.

In order to link the financial transactions with the natural persons, it is also proposed that (inter alia) managing director, director, partner… etc. of such entities shall also apply to the Assessing Officer for allotment of PAN

Thus, PAN shall be mandatory,

  • If the foreign national is a director, managing director, CEO or key managerial person of the Company, AND

  • The company has entered into financial transactions of an amount aggregating Rs.2.5 lakhs or more during 2017-18

This requirement has to be met regardless of the fact that non-resident or foreign directors might not have any financial transaction in India or with persons in India. The Assessing Officer is empowered to levy a penalty up to Rs.10,000 for not complying with the requirement of obtaining PAN in India.

Procedural matters

Applications for foreign national PAN are processed within 15 – 20 days. Self-attested copies of passport and bank statement together with 2 recent photographs are needed to submit the application.

Please note that having PAN by itself will not require you to file any returns in India. You may, however, have to file your returns if you earn income in India. We would be happy to help you understand if any tax filing is needed.

BCL India has set up a team to assist foreign directors to obtain PAN. Our secretarial team shall be glad to assist you if you have any questions in this regard. You may contact CS Adarsha (Leader – Secretarial adarsha@bclindia.in) or CS Vighnesh Bhat (Partner – BCL India vighnesh@bclindia.in)

In case of any questions, please do not hesitate to reach out to us on bclindia.in/contact/. We would be glad to be of your assistance.

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