With the recent declaration by Finance Minister Arun Jaitley in Budget 2016 that NRIs without PAN shall not be required to pay higher tax rate. It has been viewed as a step to boost NRI investments in India. Earlier NRI without was required to pay TDS highest of the following under Section 206AA:
• At the rate of 20%
• At the rate specified in relevant provision of income tax for a particular source of income
• At the rates in force
Now section 206AA has been proposed to amend in Budget 2016 where alternative documents can be furnished instead of PAN Card and NRIs shall not be accountable to pay higher rate of taxes.
Jaitely mentioned in his budget speech that whiles the global economy is suffering with crisis, Indian economy still holding its ground firmly. With the investment process making easier for NRIs without PAN Card, no doubt this move will raise the investment from them and thus, strengthen the economy.
In case of absence of PAN card, NRI investors are required to file under Section 37BC:
• Tax Residency Certificate (TRC) from the country of his residence
• Tax Identification Number (TIN) or any Unique Identification Number (UIN) of the country of his residence
• Address of the his country of residence
• Name, email id and contact number
However, PAN card is mandatory for the following types of transactions by NRI:
• Payment on transfer of any capital asset
• Fees for technical services
These measures will surely relive not just the NRIs but the foreign companies who were earlier paying higher taxes on account of absence of the PAN card.