The Central Board of Direct Taxation (CBDT), in a notification, has said that Permanent Account Number (PAN) will no longer be required for non-resident individuals and foreign companies opening bank accounts in GIFT IFSC and not having any other taxable income in India.
These entities will no longer be required to quote PAN and can instead provide form 60 to the banks for their transactions. This will also take away the spectre of income tax notices that could come from acquiring a PAN.
The move will benefit overseas firms wanting to set up treasury management operations, global institutional investors as well as non-residents who want to want to set up family investment funds or other structures at GIFT IFSC.
Tax relief
Retail money at GIFT IFSC typically comes from NRIs most of whom already have a PAN. Some of the holding companies which are set up overseas, particularly the start-ups who don’t have PAN will benefit from this, says Anshul Chandak, Head-Treasury, RBL Bank.
According to Jaiman Patel, Partner, EY India, non-residents can now open bank accounts with IFSC banking units without concerns of obtaining PAN or consequently worrying about filing tax returns in India (where the amounts in such accounts are not taxable in India).
The relaxation will boost the liability/deposits side as well as retail business segment of a bank in IFSC, said Sunil Gidwani, Partner - Financial Services, Nangia Andersen.
The banking ecosystem in IFSC comprises several private and public sector banks as well as several global MNC banks.
The Silicon Valley Bank crisis had prompted many startups to look at GIFT IFSC as an alternative to park their money.
“The Indian start-ups having exposure to SVB acted swiftly, withdrew their dollar deposits, and explored various options for parking their money. GIFT IFSC with its robust banking ecosystem provided a viable alternative to such startups. It is estimated that a significant portion of such deposits were parked in IFSC based banking units,” a recent note on onshoring Indian Innovation to GIFT IFSC had observed.
However, the requirement to furnish PAN deterred several start-ups from taking this route. This in turn prompted many representations to the government to relax the PAN requirement.
“These entities were struggling to open a bank accounts at GIFT IFSC when the whole SVB crisis unfolded. The PAN requirement was a deterrent especially given the urgency to make alternative arrangements. The notification makes things easier for these overseas entities and would result in many giving a serious thought to use GIFT for their banking needs,” said Chandak