INDIA: PAN may be made Mandatory for India Qualified Foreign Investors

Wednesday June 6 2012

It has been reported that the Indian Government may make Permanent Account Number (PAN) necessary for India Qualified Foreign Investors (QFIs). It may also allow netting off provision for taxation of capital gains.

PAN will be cleared after the completion of Know Your Client (KYC) norms. However, it will be incidental to KYC norms under form 49 AA issued by the income tax department. The KYC formalities can be fulfilled by Qualified Depository Participants (QDP), with whom will also lie the responsibility of tax deduction.

The proposal under consideration prescribes setting off capital loss for capital gains on securities transaction. However, this could be applicable only for transactions that take place during a month or so. In such a situation, if one QFI makes a capital gain of Rs 100 in a month and in the same month incurs a loss of Rs 100, then his net liability will be zero.

At the same time, if the QFI gains Rs 100 in one month and loses Rs 100 in the second month, he may have to pay tax on capital gains made in the first month.

However, his overall tax liability will be nil and the QFI can claim refund by filing a return.

This information will be updated as more details become available