When does a Foreign Company obtain a PAN in India?

Picture of by Neha Raheja
by Neha Raheja

Senior Advisor - Direct & International Tax

A Permanent Account Number (‘PAN’) is a ten-digit alphanumeric number issued by the Income Tax Department in India. The provisions related to PAN are enumerated in s. 139A of the Income-tax Act 1961 (‘ITA’). s. 139A(iii) states that every person who is required to file it’s returns under s. 139(4A) of the ITA is required to have a PAN.

In this regard, the following below-mentioned foreign companies are required to file their return in India :

  1. A Branch Office, Project Office, and Liasion Office are considered Foreign Companies from the Indian Income Tax perspective, and these entities are required to file their tax returns in India as per the provisions of the Income Tax Act 1961 (‘ITA’);
  2.  A Permanent Establishment is also treated as a foreign company & is required to file its return of income declaring its income earned in India;
  3. Foreign companies also earn income by way of royalties, fees for technical services, interest, and dividends. The ITA provides that when a foreign company has earned income only in the nature of dividends, royalty & FTS, it does not need to file its income tax return subject to taxes being withheld at the rates specified under s. 115A of the ITA. However, if the benefits of the Double Taxation Avoidance Agreement (‘DTAA’) need to be claimed, then such a foreign company is required to file its tax return in India.

Therefore, in the aforementioned circumstances, since a Foreign Company is required to file its tax return in India, it has to obtain a PAN in India.
Further Rule 114B of the Income Tax Rules r.w.s 139A(5)(c) states that any person that sells or purchases shares of an unlisted company in excess of INR 1,00,000/- per transaction is required to obtain a PAN. A foreign company is included under the definition of any person as per the definition of s. 2(31) of the ITA.
Thus, every foreign company that purchases shares of an unlisted company in excess of INR 1,00,000/- is required to obtain a PAN in India.

Are you a Foreign company & not sure if you need to obtain a PAN? Feel free to reach out to our experts, we would be happy to help.

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