The Central Board of Direct Tax (CBD) has introduced major relief by enhancing ease operation for non-residents in International Financial Services Centre (IFSC)-banking units vide notification no. 88/2023 dated 10th October 2023. This relief specifically addresses the mandatory quoting of Permanent Account number (PAN). In this article we will explore the amendments made by CBDT in Rules 114B, 114BA and 114BB of the Rules.

• Rules 114B of Income Tax Rules, 1962
 

Pre-amendment:

Income Tax Rule 114B of the Rules mandates the quoting of the Permanent Account Number (PAN) for various financial transactions as prescribed under the rules. If any person does not have the PAN and enter into the transaction prescribed under this rule, then it is required to furnish Form No. 60 either physically or electronically

Post-amendment:

A new proviso has been inserted. This new proviso pertains to foreign companies operating in IFSC who:

• (i) does not have any income subject to taxation in India; and
• (Il) does not possess a Permanent Account Number (PAN).

and entered into any of the specific transactions as mentioned below,
 

• a. Opening an account [other than a basic savings bank deposit account] with the bank;
• b. A time deposit if the amount of deposit exceeds Rs. 50,000 in each transaction or Rs. 5 lakhs in aggregate during a financial year with bank, post office, Nidhi Co. or NBFC. is required to furnish declaration in Form No. 60. This exemption streamlines the regulatory obligations for foreign companies operating within IFSC, making it easier for them to conduct business.

• Rules 114BA of Income Tax Rules, 1962
 

Post-amendment:
 

Rule 114BA provides a list of transactions wherein it shall be mandatory for a person to obtain PAN if a person has entered into the following transactions:
 

• a. Cash deposit, aggregating to Rs. 20 lakh or more, in a financial year in Bank or Post Office.
• b. Cash withdrawal, aggregating to Rs. 20 lakh or more, in a financial year in Bank or Post Office.
• c. Opening of a current account or a cash credit account with a bank or a post office.

Post-amendment:
 

The CBDT has introduced the new proviso in Rule 114BA which states that provision of Rule 114BA shall not apply in the following circumstances,

• a. where the person, making the deposit or withdrawal of an amount, except through cash, or opening a current account that is not a cash credit account, is a non-resident (not being a company) or a foreign company;
• b. the transaction is conducted with an International Financial Services Centre (IFSC) banking unit; and
• c. such non-resident (not being a company) or the foreign company does not have any income subject to taxation in India.

• Rules 114BB of Income Tax Rules, 1962
 

Post-amendment:
 

These rules aim to ensure that individuals and entities provide their PAN or Aadhaar numbers for specific financial transactions, with some exceptions, and the same is required to verified by the appropriate tax authorities to maintain accuracy and transparency.
 

Post-amendment:
 

The CBDT has effectively extended exemption similar to the provisions outlined in Rule 114BA, which states that provision shall not apply in the following circumstances:

• a. where the person, making the deposit or withdrawal of an amount, except through cash, or opening a current account that is not a cash credit account, is a non-resident (not being a company) or a foreign company;
• b. the transaction is conducted with an International Financial Services Centre (IFSC) banking unit; and
• c. such non-resident (not being a company) or the foreign company does not have any income subject to taxation in India.