The Central Board of Direct Taxes (CBDT) has recently issued Notification 88/2023 to amend the Income Tax Rules, 1962. The notification introduces relaxations related to Permanent Account Number (PAN) and other compliances for non-residents and foreign companies transacting with International Financial Services Centre (IFSC) Banking Units in India.
Highlights of CBDT Notification 88/2023
i) Non-individual non-residents (such as foreign companies) transacting with IFSC banking units are exempted from PAN requirements if they don’t have any taxable income in India. They can furnish Form 60 instead.
ii) The existing requirement for non-individuals to quote PAN for deposits/withdrawals above Rs 50 lakhs will not apply for transactions with IFSC banking units by non-resident individuals and foreign companies without taxable income in India.
iii) Similar relaxations are provided for non-individuals with respect to the requirement of quoting PAN for opening current accounts (other than cash credit accounts) with banks and post offices.
iv) The Form 60 has been amended to capture details of non-residents and foreign companies transacting with IFSC banking units.
v) “IFSC Banking Unit” has been defined as a financial institution licensed by IFSCA to undertake banking activities at IFSC.
Analysis of Key Changes
The changes are aimed at easing compliance burdens for non-residents and foreign investors transacting with IFSC banking units in India.
Relaxing PAN requirements for offshore transactions with IFSC banking units can help attract more foreign investment flows into IFSCs. It creates a more efficient environment for non-residents/foreign companies to access Indian capital markets, banking services, and investment opportunities through IFSC banking units.
However, suitable safeguards in terms of alternate documents have been put in place. Non-residents/foreign companies will need to provide an alternate declaration (revised Form 60) with details of identity, address, and estimated income.
Overall, the changes introduced by the CBDT are progressive steps to boost the competitiveness of IFSCs in India and integrate them with global financial markets. Relaxing compliance norms for offshore investors/clients also signals India’s commitment to make IFSCs a preferred destination for international financial services.
CBDT Income Tax Notification 88/2023 dated 10/10/2023: PAN Requirement Relaxed for Non-residents/Foreign Companies dealing with IFSC Banking Units