The Central Board of Direct Taxation (CBDT) amended the Income Tax Rules, 1962, through a notification on Wednesday. As per the amendment, the Permanent Account Number (PAN) is not required for non-resident individuals and foreign companies not having any other taxable income in India to open bank accounts in GIFT International Financial Services Centre (GIFT IFSC).
Non-resident individuals and foreign companies will not be required to quote PAN; instead, they must provide a declaration in Form 60 under the Income Tax Rules to the banks for their transactions. The CBDT notification contains the amended Form 60 that can be filed by any person (except an Indian company or firm) or a foreign company covered under Rule 114B who does not have a PAN and wishes to open a bank account.
The amendment to allow foreign companies and non-residents to open bank accounts in GIFT IFSC without a PAN card will benefit many global institutional investors, overseas firms wishing to set up treasury management operations, and non-residents to set up family investment funds or such other structures at GIFT IFSC.
According to Jaiman Patel, Partner at EY India, now non-residents can open bank accounts with IFSC banking units without the concern of obtaining a PAN or consequently worrying about filing tax returns in India (where the amounts in these accounts are not taxable in India).
Nangia Andersen LLP Partner Sunil Gidwani stated that this relaxation will make it easy for NRIs, foreign companies and non-residents to open a bank account with IFSC banks. It will boost the deposits or liability side and the retail business segment of an IFSC bank.
Retail money at GIFT IFSC usually comes from NRIs, mostly having a PAN. Some of the holding companies set up overseas, particularly the startups that do not have a PAN will benefit from this relaxation.
The banking ecosystem in IFSC comprises various private and public sector banks and several global MNC banks. The Silicon Valley Bank (SVB) crisis prompted many startups to consider GIFT IFSC as an alternative to park their money.
Anshul Chandak, Head-Treasury at RBL Bank, stated that these entities were struggling to open bank accounts at GIFT IFSC when the SVB crisis unfolded. The PAN requirement was a deterrent, especially due to the existing urgency to make alternative arrangements. The notification makes things easier for overseas entities and would result in many giving serious thought to using GIFT for their banking needs.
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