ITR Filing: As an NRI/OCI, is your PAN card inoperative? Here's what I-T Department suggests

The Income Tax Department has issued important information for Non-Resident Indians (NRIs) who have been receiving notices about their Permanent Account Number (PAN) cards turning 'inoperative'. Many NRIs are getting messages and notifications of their PAN turning inoperative after the June 30 deadline to link the PAN and Aadhaar.

However, the I-T department has clarified that many NRIs, who don't possess an Aadhaar number, need not worry about their PANs becoming inoperative due to the absence of this linkage. Rather, the status of their PAN cards depends on their resident status, which should have been conveyed to their Jurisdictional Assessing Officer (JAO) or declared in the Income Tax Return (ITR) filed in any of the last three Assessment Years (AYs).

According to the I-T department, NRIs whose PANs have been deemed inoperative can resolve this issue by intimating their residential status to their respective JAO. The supporting documents required for this process include a copy of the PAN card and a copy of their passport that confirms their period of residence outside India.

Following the tax department's update of their status in the PAN database, NRIs can inform the Assessing Officer (AO) about the PAN-Aadhaar linkage to reactivate their PAN.

Dear Taxpayers,

Concerns have been raised by certain NRIs/ OCIs regarding their PANs becoming inoperative, although they are exempted from linking their PAN with Aadhaar.
Further, PAN holders, whose PANs have been rendered inoperative due to non-linking of PAN with Aadhaar,_

— Income Tax India (@IncomeTaxIndia) July 18, 2023

OCIs and their PAN status

Similarly, for Overseas Citizen of India (OCIs) or foreign citizens who had applied for a PAN under resident status and have not updated their residential status or haven't filed an ITR in the last three AYs, their PANs could also have been rendered inoperative. These individuals are also advised to update their residential status with their JAO and submit supporting documents to update the PAN database.

Consequences of an 'Inoperative' PAN

An important clarification made by the department is that an 'inoperative' PAN does not translate to an 'inactive' PAN. Holders of an inoperative PAN can still file an ITR. However, they must be aware of certain implications, such as withholding of pending refunds and interest on such refunds. Moreover, Tax Deducted at Source (TDS) will be deducted at a higher rate as per Section 206AA, and Tax Collected at Source (TCS) would need to be collected at a higher rate in accordance with Section 206CC of the Income Tax Act, 1961.

Alternative process for retaining indian address

For NRIs and OCIs who wish to retain their Indian address, there is an alternative to this process. These individuals can opt to obtain an Aadhaar number and then follow the necessary steps to link their PAN with the Aadhaar.

Challenges with challan download post-payment

The department has also taken note of concerns about difficulties faced by PAN holders in downloading the challan after making the payment for Aadhaar-PAN linking. In response, the tax department has advised taxpayers to check the challan payment status in the "e-pay tax" window of the e-filing portal. After successful payment of fees, they can proceed to link their PAN with Aadhaar.

Additionally, the tax department has reassured taxpayers that cases where the fee payment and consent for linking have been received, but the actual linking has not been completed until June 30, 2023, will be duly considered.