Income Tax Department Clarifies Doubts on ‘Inoperative PAN’

The Income Tax Department clarified the concerns over the Permanent Account Numbers of Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) becoming inoperative. 

The department highlighted that the PAN status of NRIs and OCIs does not make them entirely ineffective, and they can still be used to file Income Tax returns (ITRs) without any blockages. However, the taxpayers will have to face higher tax deductions at source and will not get any refunds until their residential status is updated with the department. 

The confusion arose after the government made it mandatory for everyone to link their PAN and Aadhaar, but the NRIs and the OCIs were exempted from this requirement. Following this, some PAN holders found their PANs labelled ‘inoperative’.

Regarding NRIs, the department has verified that their residential status has been registered if they have filed the ITR in at least one of the preceding three Assessment Years (AYs) or if they have informed the Jurisdictional Assessing Officer (JAO) about their residential status. If any of the conditions mentioned above have not been fulfilled, the PANs of NRIs might have been made inactive.

NRIs are encouraged to be proactive and promptly inform their respective Jurisdictional Assessing Officer (JAO) about their current residential status and the necessary supporting documents to ensure their PAN information is up-to-date. For this purpose, NRIs can conveniently visit the official Income Tax Department (ITD).

OCIs, NRIs or foreign citizens who might have applied for PAN under resident status but have not corrected or updated their residential status to the JAO or have not filed ITR in any of the last three AYs may also face inoperative PANs.

In any such case, the Income Tax department advises the affected people to resolve the issue by informing their respective JAOs about their current residential status and producing relevant documents to ensure that the PAN is up to date.

The ITD has highlighted that an inoperative PAN does not necessarily mean an inactive PAN. Taxpayers who have an inoperative PAN can still file their ITRs, but the refunds may not be issued, and they will have to face a higher TDS and TCS, according to section 206AA and section 206CC of the Income Tax Act.

For any clarifications/feedback on the topic, please contact the writer at samiksha.swayambhu@clear.in