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Direct Taxation

July 2026

Indian Tax Compliance for Non-Resident Directors: PAN vs. ITR Obligations

Introduction

Picture of by Anjali Darak
by Anjali Darak

Manager - Direct Tax

With increased globalization, it is common for foreign individuals to serve as directors on the boards of Indian companies. While such Non-Resident Directors (NRDs) may not be physically present in India or actively involved in day-to-day operations, their association with an Indian entity creates important tax compliance obligations. Two critical aspects of Indian tax compliance for such individuals are:

  • Obtaining a Permanent Account Number (PAN)
  • Filing an Income Tax Return (ITR)

Although these obligations may appear similar or overlapping, they serve distinct purposes under Indian tax law.

Coming to this month’s Taxation Times, here’s what we have:

  1. An article on Indian Tax Compliance for Non-Resident Directors: PAN vs. ITR Obligations
  2. Case Laws from various courts & jurisdictions
  3. Tax Compliance Calendar – July 2026
  4. Circulars & Notifications – June 2026
  5. Tax News from around the world

We hope that you find this month’s edition of the Taxation Times useful. In case you have any feedback or need us to include any information to make this issue more informative, please feel free to write to us at info@uja.in

Happy Reading!

Best Regards,
UJA Tax Team

Indian Tax Compliance for Non-Resident Directors: PAN vs. ITR Obligations

1. Introduction

With increased globalization, it is common for foreign individuals to serve as directors on the boards of Indian companies. While such non-resident directors (NRDs) may not be physically present in India or actively involved in day-to-day operations, their association with an Indian entity creates important tax compliance obligations. Two critical aspects of Indian tax compliance for such individuals are:

  • Obtaining a Permanent Account Number (PAN)
  • Filing an Income Tax Return (ITR)

These obligations may appear similar and misunderstanding the distinction often leads to either unnecessary compliance or inadvertent non-compliance. This article examines the legal framework and practical implications surrounding PAN and ITR obligations for non-resident directors.

2. Residential Status and Its Relevance

Before analyzing compliance requirements, it is essential to determine the individual’s residential status under Section 6 of the Income-tax Act, 2025. For non-resident directors, the most common Indian-sourced income is:

  • Director’s sitting fees
  • Commission
  • Remuneration
  • Reimbursement-based taxable benefits (in some cases)

Once such income arises, compliance obligations are triggered.

3. PAN Requirement for Non-Resident Directors

Legal Basis

Section 262 Rule 158 establishes the legal requirement to obtain and use a Permanent Account Number (PAN) if

  • total income exceeds the basic exemption limit,
  • Bring Director or Managing Director etc. of business which entered into specified financial transactions exceed ₹2,50,000 in a financial year.

Rule 158 provides the procedural framework for implementing Section 262:

  • Application Forms: PAN applications are filed using prescribed forms (Forms 93–96) based on applicant category.
  • Timelines: PAN must be applied for by 31 May following the financial year of relevant transactions.
  • Documentation: Proof of identity, address and date of birth is mandatory; non-residents may use foreign bank statements as address proof or as required.

Further, under Section 397, PAN becomes crucial for avoiding higher withholding tax rates.

Practical Scenarios for PAN Requirement

A non-resident director is required to obtain a PAN in the following situations:

  • Receipt of Director’s Fees

PAN helps ensure TDS is applied at the correct rate (including treaty rates) instead of the higher default rate (20%).

  • Treaty Benefits (DTAA Relief)

To claim Double Taxation Avoidance Agreement (DTAA) benefits, PAN is typically required along with TRC and other declarations.

  • Regulatory and Corporate Requirements

Indian companies usually require PAN for director onboarding and it facilitates TDS reporting and compliance under AIS and other filings.

4. Income Tax Return (ITR) Filing Obligations

Legal Framework for NRDs

Merely holding a PAN does not create a tax-filing obligation. A foreign director is obligated to file an ITR only if they meet any of certain criteria. Section 263 of the Income-tax Act mandates filing of an ITR if:

  • Total Indian income exceeds the basic exemption limit (like director’s remuneration), or
  • Receive a salary, director’s sitting fees, or professional commissions from the Indian entity and want to claim a refund on taxes withheld (TDS)
  • The individual receives dividends, royalties, or technical fees from India and want to claim a lower tax rate using a DTAA, or
  • If the individual holds unlisted shares in an Indian company or own other taxable physical/financial assets in India.

Situations Where ITR May Not Be Required

A non-resident director may not need to file an ITR if:

  • Income is below the basic exemption limit
  • Entire tax liability is discharged through TDS
  • No refund is claimed
  • No other compliance triggers are applicable

5. PAN vs. ITR: Key Differences

ParticularsPANITR Filing
NatureIdentification numberAnnual compliance requirement
PurposeTrack financial transactions and taxesReport income and compute tax liability
TriggerIncome, transactions or TDS provisionsIncome threshold or refund claim
Mandatory for NRDsGenerally, yes if income earnedDepending on income level
Impact of non-complianceHigher TDS (20%), compliance issuesPenalties, interest, inability to claim refund

6. Interplay Between PAN and TDS Provisions

Section 397 (Higher TDS Without PAN)

If PAN is not furnished:

  • TDS may be deducted at 20% or higher rate, even if DTAA provides a lower rate

Treaty vs. Domestic Law

Although judicial precedents indicate that DTAA provisions may override Section 397, in practice:

  • Diductors generally apply higher rates in absence of PAN.
  • Non-residents must file ITR to recover excess tax.

7. Best Practices for Non-Resident Directors

To ensure smooth compliance, NRDs should consider:

Obtain PAN

  • Apply upon appointment as director
  • Avoid higher withholding and administrative delays

Maintain Proper Documentation

  • Tax Residency Certificate (TRC)
  • Form 41
  • Agreement or board resolution outlining remuneration

Evaluate ITR Requirement Annually

Even if income is small:

  • Assess threshold
  • Determine if refund opportunity exists

Coordinate with Indian Company

  • Ensure correct TDS deduction
  • Verify Form 131/ TDS certificates
  • Cross-check Form 168

Conclusion

The distinction between PAN and ITR obligations is fundamental for non-resident directors engaged with Indian companies. While PAN serves as a foundational identification and compliance tool, it is often essential to avoid higher tax deductions, whereas ITR filing depends on income thresholds, refund claims and overall tax position.

In practice, due to the interplay of withholding tax provisions, treaty benefits and administrative procedures, most non-resident directors end up requiring both PAN and ITR compliance. Early planning, proper documentation and coordination with Indian tax advisors can significantly reduce compliance risks and optimize tax outcomes.

Case Laws

MARCH 2026
[2026] 187 taxmann.com 401 (Gujarat) HIGH COURT OF GUJARAT Hina Prakash Shah v. Income-tax Officer - 09-06-2026

Fact :

  • The petitioner-assessee challenged, under Article 226, the order under section 148A(d) dated 29.07.2022, the notice under section 148 dated 29.07.2022, and the consequential proceedings under section 147 for AY 2014-15 as time barred. The AO had earlier issued a notice under section 148 on 24.06.2021 during the extended period under TOLA, which, pursuant to the Supreme Court’s directions in Ashish Agarwal, was to be treated as a notice under section 148A(b).
  • The AO provided information under section 148A(b) on 25.05.2022, granting 15 days to respond with the due date on 09.06.2022. The petitioner filed its reply on 07.06.2022. The AO thereafter issued the order under section 148A(d) on 29.07.2022 and issued the notice under section 148 on the same date.
  • On write before the High Court.

Held I:

  • In the facts of the case, the respondent – Assessing Officer has provided information pursuant to the directions issued by the Apex Court in the case of UOI v. Ashish Agarwal [2022] 138 taxmann.com 64/286 Taxman 183/444 ITR 1 (SC) on 25.05.2022 and therefore, considering 15 days’ time to file reply by the assessee, the due date would be 09.06.2022. The petitioner filed reply on 07.06.2022. The order under Section 148A(d) of the Income-tax Act, 1961 was issued on 29.07.2022. However, considering the period of limitation from the date of issuance of notice under Section 148 read with TOLA upto 30.06.2021, the limitation for issuance of notice under Section 148 applying the decision of the Apex Court in the case of Ashish Agarwal (supra) as well as UOI v. Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC), would be 16.06.2022 as original notice under Section 148 [now 148A(b)] was issued on 24.06.2021. [Para 7]
  • Senior Standing Counsel Mr. Karan G. Sanghani has verified the above dates and could not controvert the same. [Para 8]
  • In view of above, the impugned order dated 29.07.2022 issued under Section 148A(d), Notice under Section 148 dated 29.07.2022 and consequent reopening proceedings would be invalid as the said notice is issued after 16.06.2022 as per the decision of the Apex Court in the case of Ashish Agarwal (supra). Therefore, the impugned notice having been issued beyond the ‘surviving time’ would be invalid notice as held by the Apex Court in the case of UOI v. Rajeev Bansal (supra). [Para 9]
  • In view of foregoing reasons, the present writ petition is allowed. The impugned order under Section 148A(d) dated 29.07.2022 and Notice under Section 148 dated 29.07.2022 are hereby quashed and set aside and all consequential proceedings are also quashed and set aside. Rule is made absolute to the aforesaid extent. [Para 10]
  • In Favour of: The assessee
[2026] 187 taxmann.com 678 (Delhi - Trib.) IN THE ITAT DELHI BENCH ‘E’ Accenture Impex (P.) Ltd. v. Deputy Commissioner of Income-tax - 16-06-2026

Fact :

  • The assessee-company filed its return of income for AY 2016-17, and its case was reopened on the basis of information regarding suspicious bank transactions and alleged involvement in fraudulent export activities.
  • Pursuant to proceedings under section 148A, the AO issued notice under section 148 on 11-7-2022 after obtaining approval from PCIT-1, Delhi, and thereafter completed reassessment under section 147 read with section 144 on 28-5-2023.
  • On appeal, the CIT(A)/NFAC set aside the reassessment order and restored the matter to the file of the AO for making a fresh assessment.
  • Aggrieved, the assessee filed an appeal before the Tribunal challenging, inter alia, the validity of the notice issued under section 148 for want of approval from the competent authority under section 151(ii).

Held:

  • It is an admitted fact that where more than three years had elapsed from end of relevant assessment year, sanction for reopening was to be obtained from Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General as per section 151(ii). It is an admitted fact that in the instant case the approval was obtained under section 151 from the PCIT-1, Delhi and notice under section 148 was issued on 11-7-2022, which demonstrates that notice dated 11-7-2022 under section 148 was issued without validly complying with section 151 which is not in accordance with law and thus invalid, in view of the Apex Court decision in Union of India v. Rajeev Bansal (2024) 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC). [Para 7]
  • In view of above factual matrix and respectfully following the aforesaid decisions, the notice issued under section 148 is bad in law and thus invalid, hence, the same is quashed and accordingly, the consequent assessment order is also quashed. [Para 8]
  • In the result, the appeal of the assessee is allowed. [Para 9]
  • In Favour of: The assessee
[2026] 187 taxmann.com 711 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax (International Taxation)-1 v. Ernst and Young U.S. LLP* V. Kameswar Rao and Vinod Kumar, JJ. ITA 423, 424, 715, 753 & 760 OF 2025† JUNE 18, 2026

Facts I:

  • The assessee-LLP, a US-based member of the EY network, entered into secondment/deputation agreements with EY India entities under which its personnel were deputed to work in India. For the relevant years, it filed returns and claimed that cross-charges to EY India entities for secondees were cost-to-cost reimbursements not chargeable to tax in India under Article 12 of the India-USA DTAA.
  • The Assessing Officer opined that the secondees continued to be employees of the US entity who made available technical knowledge and expertise to the Indian entities. He, thus, treated the reimbursements as Fees for Technical Services (FTS) under section 9(1)(vii) and Article 12 of the India-USA DTAA.
  • On objections, the DRP upheld the order of the Assessing Officer. Final assessment orders were passed accordingly.
  • On appeals, the Tribunal set aside the assessments holding that the secondees were to be regarded as employees of the EY India entities, the cross-charges were cost-to-cost reimbursements of salary already taxed in the hands of the secondees in India, and the ‘make available’ requirement under Article 12(4)(b) was not satisfied.
  • On appeal to the High Court :

Held :

  • Section 9 of the Income-tax Act, 1961 / Section 9 of the Income-tax Act, 2025 read with article 12 of DTAA between India and USA – Income – Deemed to accrue or arise in India (Royalties or Fees For Technical Services – Secondment of Employees) – Assessment years 2018-19 to 2022-23 – Assessee-LLP, a US-based member of EY network, seconded its employees to three EY India entities under deputation agreements – Assessee received certain amount towards cost-to-cost reimbursement of salary of seconded employees – Assessee claimed that said amount was not taxable in India as it was cost-to-cost reimbursement – Assessing Officer opined that secondees continued to be employees of US entity who made available technical knowledge and expertise to Indian entities – He, thus, treated reimbursements as taxable in India as FTS/FIS – Tribunal held that secondees were to be treated as employees of EY India entities and receipts would not be taxable as FTS – It was noted that seconded employees were working in Indian entities, during period of assignment and on such assignment, seconded employees continued to maintain their lien with assessee – In fact, seconded employees were entitled to all available benefits including social security from their employer, i.e., assessee – Additionally, Indian entities could not have terminated services of seconded employees and they only had right to undertake legal or disciplinary action against misconduct, fraud, willful negligence or any illegal action of any international assignee and terminate secondment, prior to agreed period and relieve them from Indian entities to enable them join assessee – Whether thus, assignment of secondees was akin to a deputation from assessee to EY India entities, to enable secondees use their expertise of technical knowledge/know how and make available same to EY India entities, for Indian entities to then use same for their working in future – Held, yes – Whether, thus, payments received by assessee from EY India entities towards secondment of employees were taxable in India as FTS under section 9(1)(vii) and article 12 of India-USA DTAA as services rendered by assessee satisfied ‘make available’ condition in article 12(4)(b) of India-USA DTAA – Held, yes [Paras 67 and 70]

  • In Favour of: The Revenue

Facts II:

  • The assessee-LLP, a US-based member of the EY network, received consideration from Indian clients for professional advisory and consultancy services rendered from the USA. The assessee claimed same as exemption under Article 12(5)(e) read with Article 15 of the India-USA DTAA, treating such income as ‘professional services.
  • After examining engagement letters and scope of work, the Assessing Officer held the impugned services to be technical/consultancy in nature, including training to customers, thereby satisfying ‘make available’ condition in Article 12(4)(b). The Assessing Officer after allowing exclusions under Article 12(5)(e) for certain professional streams, taxed balance as FTS.
  • The DRP upheld the order of the Assessing Officer, observing that article 15(2) covers specified ‘professional services’ and that services by personnel such as economists, MBA graduates and other technical experts did not qualify; it further agreed that the inclusion of training satisfied the ‘make available’ test and directed the Assessing Officer to clearly set out the breakup between receipts treated as professional services and those taxed as FIS in the final orders.
  • The Tribunal reversed the additions, holding that the ‘make available’ test under Article 12(4)(b) was not met and that Article 15(2) is inclusive, not confined to persons governed by statutory professional bodies. He, thus, concluded that the receipts fell within Article 12(5)(e) read with Article 15 and were not taxable in India.
  • On appeals to the High Court:

Held II:

  • Section 9 of the Income-tax Act, 1961 / Section 9 of the Income-tax Act, 2025 read with articles 12 and 15 of DTAA between India and USA – Income – Deemed to accrue or arise in India (Royalties or Fees For Technical Services – Advisory, Consultancy and Professional Service) – Assessment years 2018-19 and 2020-21 to 2022-23 – Assessee-LLP, a US-based member of EY network, received consideration from Indian clients for professional advisory and consultancy services rendered from USA – Assessee claimed exemption under Article 12(5)(e) read with Article 15 of India-USA DTAA, treating such income as ‘professional services’ – Assessing Officer examined engagement letters/scope statements and held services to be technical and consultancy in nature, including training to customers, thereby satisfying ‘make available’ condition in Article 12(4)(b) – After allowing exclusions under Article 12(5)(e) for certain professional streams, Assessing Officer taxed balance as FTS – Tribunal reversed additions holding that ‘make available’ test was not met on facts and that definition of ‘professional services’ in Article 15(2) was inclusive – It was noted that Tribunal had not delineated actual services provided by assessee to its Indian clients or discussed whether such services could be included in definition – However, Tribunal merely noted qualifications of employees of assessee and held that they would come within ambit of definition of professional services provided under Article 15(2) – Furthermore, merit and effect of finding of fact by Assessing Officer that services were in nature of technical services and consultancy had neither been discussed nor distinguished by Tribunal – Whether since
  • Tribunal had not examined key differences regarding services which had been charged as FTS in contrast to nature of services which were found to be exempted, matter was to be remanded back to Tribunal for reconsideration.
  • In Favour of: Matter remanded

Notifications June 2026

A. Notifications

F. No.225/56/2026/IT A-II Guidelines for Compulsory Selection of returns for Complete Scrutiny during the Financial Year 2026-27 -procedure for compulsory selection in such cases, DATED 4-6-2026

The Guidelines for Compulsory Selection of returns filed during the financial year 2025-26 under the Income-tax, Act 1961 are hereby issued in pursuance of Section 536(2)(c) of the Income-tax Act, 2025. The parameters for compulsory selection of returns for complete scrutiny during Financial Year 2026-27 and procedure for compulsory selection in such cases are mentioned in this notification.

NOTIFICATION NO. S.O. 2768 ( E ) [NO. 70/2026/F. NO. 500/MISC./S10(23FE)/FT&TR-II], DATED 1-6-2026

In exercise of the powers conferred by section 11(5) read with Note 5(d)(ii) of Schedule V [Table: Sl. No. 7] of the Income-tax Act, 2025 (30 of 2025), the Central Government hereby specifies the business (other than the business specified in Note 5(d)(i) of the said Schedule), which is engaged in the infrastructure sub-sectors mentioned in the Updated Harmonised Master List of Infrastructure sub-sectors, in the notification of the Government of India in the Ministry of Finance, Department of Economic Affairs number F. No.13/1/2025-IPP, dated the 19th September, 2025, published in Gazette of India, Extraordinary, Part I, Section 1, as a business for the purposes of Schedule V [Table: Sl. No. 7] of the said Act.

  1. This notification shall come into force from the date of its publication in the Official Gazette.

Tax Calendar May 2026

07th July 2026

  • TDS/TCS Deposit Due Dates: Due date for deposit of Tax deducted/collected for the month of May, 2026. However, all sum deducted/collected by an office of the government shall be paid to the credit of the Central Government on the same day where tax is paid without production of an Income tax Challan.

31st July 2026

  • All income tax returns except ITR-6: Return of income for the Assessment Year 2026-27 for all assessee other than (a) corporate assessee or (b) non-corporate assessee (whose books of account are required to be audited) or (c) working partner of a firm whose accounts are required to be audited or the spouse of such partner if the provisions of section 5A applies to such spouse or (d) an assessee who is required to furnish a report under section 92E.
  • Payment of Self-Assessment Tax (if due date of submission of return of income is July 31, 2026
  • Form 10BA: Declaration to be filed by the assessee claiming deduction under section 80GG (if due date of submission of return of income is July 31, 2026)
  • Form 10BBD: Statement of eligible investment received (if due date of submission of return of income is July 31, 2026)
  • Form 10CCD: Certificate under sub-section (3) of section 80QQB for authors of certain books in receipt of royalty income, etc. (if due date of submission of return of income is July 31, 2026)
  • Form 10CCE: Certificate under sub-section (2) of section 80RRB for Patentees in receipt of royalty income, etc. (if due date of submission of return of income is July 31, 2026)
  • Form 10E: Form for furnishing particulars of income under section 192(2A) for claiming relief u/s 89 (if due date of submission of return of income is July 31, 2026)
  • Form 10-EE: Taxation of income from retirement benefit account maintained in a notified country (if due date of submission of return of income is July 31, 2026)
  • Form 10FC: Authorization for claiming deduction in respect of any payment made to any financial institution located in a Notified jurisdictional area. (if due date of submission of return of income is July 31, 2026)
  • Form 10H: Certificate of foreign inward remittance (if due date of submission of return of income is July 31, 2026)
  • Form 10IA: Certificate of the medical authority for certifying ‘person with disability’, ‘severe disability’, ‘autism’, ‘cerebral palsy’ and ‘multiple disability’ for purposes of section 80DD and section 80U (if due date of submission of return of income is July 31, 2026)
  • Form 10-IEA: Application for exercise of option under clause (i) of sub-section (6) of section 115BAC or withdrawal of option under the proviso to sub-section (6) of section 115BAC of the Income-tax Act, 1961 (if due date of submission of return of income is July 31, 2026)
  • Form 10IG: Statement of Exempt income under clause (4D) of section 10 of the Income-tax Act, 1961 (if due date of submission of return of income is July 31, 2026)
  • Form 10IH: Statement of income of a Specified fund eligible for concessional taxation under section 115AD of the Income-tax Act, 1961 (if due date of submission of return of income is July 31, 2026)
  • Form 10-II: Statement of exempt income under clause (23FF) of section 10 of the Income-tax Act, 1961 (if due date of submission of return of income is July 31, 2026)
  • Form 10-IK: Annual Statement of Exempt Income under sub-rule (2) of rule 21AJA and taxable income under sub-rule (2) of rule 21AJAA (if due date of submission of return of income is July 31, 2026)
  • Form 3CFA : Form for opting for taxation of income by way of royalty in respect of Patent (if due date of submission of return of income is July 31, 2026)
  • Form 3CT : Income attributable to assets located in India under section 9 of the Income-tax Act, 1961 (if due date of submission of return of income is July 31, 2026
  • Form 56FF : Particulars to be furnished under clause (b) of sub-section (1B) of section 10A of the Income-tax Act, 1961 (if due date of submission of return of income is July 31, 2026)
  • Form 5C : Details of amount attributed to capital asset remaining with the specified entity (if due date of submission of return of income is July 31, 2026)

Tax News from Around the World

1. OECD / Global Developments

First GloBE Information Return (GIR) deadline – 30 June 2026

  • MNEs (> €750m turnover) must file their first Pillar Two return by 30

Pillar Two Deadline & GIR Filing

  • Filing requires granular entity-level data (100+ data points)

GIR compliance complexity

  • Implemented across 60+ countries with 15% minimum tax

Global implementation overview

Country-Level Pillar Two Implementation Updates

  • Belgium extended reporting deadline to 30 September 2026
  • Singapore proposed amendments to implement safe harbour + reporting rules
  • Norway and Bahamas introduced domestic minimum tax changes

Global Pillar Two tracker

2. European Union

EU Minimum Tax Directive in Effect

3. United States

US exemption from Pillar Two

Digital Asset Taxation Focus

4. UK & Treaty Developments

  • UK–New Zealand Double Tax Treaty (1 June 2026) – Dividend WHT reduced to 15% → 5% (or 0% in certain cases)

UK–NZ DTT update