Understanding the need for PAN in India for Overseas Individuals and Companies

June 17, 2025

In India, the Permanent Account Number (PAN) is of critical importance for various financial, legal, and tax-related activities. PAN is issued by the Income Tax Department of India and is used to uniquely identify individuals and entities in the tax system. While PAN is widely known for its use among Indian residents, it's equally important for foreign individuals and companies who are involved in various activities within the country.

Circumstances under which an overseas individual or company must obtain a Permanent Account Number (PAN) in India:

• Branch Office or Liaison Office in India.

Foreign entities that operate in India through various modes of presence such as a branch office, liaison office, project office, or any other similar establishment are considered to be foreign companies under the Income Tax Act, 1961. This means that, even though these entities are incorporated outside India, their operations within Indian territory subject them to Indian tax laws.

As per the Act, such entities are required to obtain a Permanent Account Number (PAN) which serves as a unique identification number and must file Income tax returns (ITR) in India.

• Economic or Financial Transactions

If an overseas entity or individual is involved in any financial transaction that requires the submission of PAN details, they must obtain one. This includes transactions such as:



• Sale or purchase of property
• Opening a bank account in India
• Investing in securities or mutual funds
• Purchase of a motor vehicle

• Shareholders in Indian Company

Under Section 285BA of the Income Tax Act, certain businesses and organizations must report details of high value financial transactions they deal with during the financial year to the Income Tax Department. This includes foreign individuals as well as foreign companies, so when a company receives ₹10 lakhs or more from foreigners or foreign companies in a year, either as share application money or in exchange for issuing shares, they must report it under Statement of Financial Transactions for which the due date is 31st May of the following year.

How to apply for PAN as a Foreigner?

To read more about PAN and step-by-step guide for application, follow the article : PAN 2.0 Project- Digital PAN

Major Consequences of not having PAN as a Non-Resident

• Inability to file Income tax returns which could lead to non-compliance issues and potential penalties.
• Without a PAN, the TDS rate can be higher — typically at 20% or the maximum applicable rate — compared to the normal rates which are usually lower.
• If excess tax has been paid or non-resident is eligible for refund, it is not possible to claim without a PAN.
• The government requires a PAN to track and assess capital gains accurately. Without a PAN, tax calculation or potential refunds might not be processed correctly.

Penal Provisions:

Section 272B provides penalty for failure to comply with the provisions:

(i) Penalty of Rs. 10,000 can be levied for failure to comply with the provisions of Section 139A

(ii) It also provides for penalty of Rs.10000 per default in case of default by the taxpayer in complying with the provisions relating to PAN, i.e.,

• not obtaining PAN, even though he is liable to obtain PAN
• knowingly quoting incorrect PAN in any prescribed document in which PAN is to be quoted
• intimating incorrect PAN to the person deducing tax or person collecting tax.
• holding more than one PAN