Pan Compliance: Us Companies And India

A Permanent Account Number (PAN) is a crucial document for all taxpayers in India. Companies incorporated in India or abroad need a PAN to operate in India. This includes businesses that are Indian but generate income outside the country, as well as foreign companies operating in India. A PAN is necessary for tax filing, opening bank accounts, legal compliance, claiming tax deductions, and other financial activities. It is also required to obtain a Tax Registration Number (TRN). The process of applying for a PAN can be done online or offline and typically takes around 15 days.

Companies incorporated in India

The PAN is required for several reasons, including:

• Company registration: It is a legal requirement for registering and incorporating a company in India.
• Opening bank accounts: Banks require the company’s PAN details to comply with financial and tax regulations.
• Income tax identification: The PAN allows the Income Tax Department to keep track of all income-earning entities in the country and aids in regulating post-incorporation compliance requirements for companies.
• Filing income tax returns: The PAN links a company’s financial activities to its tax payments, streamlining the process of filing income tax returns.
• Financial transactions: PAN is mandatory for undertaking any financial transactions above a certain threshold, such as opening a bank account, receiving a taxable salary or professional fees, or selling or purchasing assets.
• GST registration: A PAN card is one of the essential documents required for GST registration.
• Foreign trade: Companies engaged in export and import businesses need a PAN for foreign exchange transactions.
• Compliance with the Income Tax Act of 1961: The PAN ensures compliance with financial regulations and helps the Income Tax Department track all financial transactions.

The process of applying for a PAN for companies incorporated in India can be done online or offline. Here is a step-by-step guide for both processes:

Online Application:

• Visit the NSDL website and select either Form 49A (for Indian entities) or 49AA (for foreign entities) from the application type dropdown menu.
• Choose the ‘Firm’ category and enter your company details, including the name (in the ‘Last Name’ field), incorporation date, and contact information.
• Fill in the company-specific details, such as the registration number, financial information, and mailing address.
• Determine your Assessing Officer (AO) code by visiting the website’s ‘AO Code Search for PAN’ page.
• Upload the necessary documents (proof of identity, address, etc.) and pay the application fee. Upon successful upload and payment, click “Submit” to file your application.
• You will receive an acknowledgement via email containing a PDF of the acknowledgement form and a unique number. Note this number down for tracking your PAN card status. Ensure the envelope containing your application is marked as ‘Application for PAN with Acknowledgement’.
• Print and fill out the acknowledgement form and send it to the NSDL office within 15 days, along with a copy of your company’s registration certificate. If you chose the demand draft (DD) as your payment method, include the DD with your form. Remember to mark the envelope as ‘Application for PAN with Acknowledgement’, and note that processing will only occur once proof and payment are received.

Offline Application:

• Download Form 49A (for Indian companies) or Form 49AA (for foreign entities) from the NSDL or UTIITSL website. Print out the form.
• Fill in the required details in the form meticulously. Ensure all the information is accurate and up to date.
• Attach the necessary documents as specified in the form’s instructions. These typically include proof of identity, address, and the company’s incorporation certificate.
• Submit the completed form and attached documents to the nearest NSDL processing centre. Addresses for these centres can be found on the government’s TIN website.
• Upon submission, you will receive an acknowledgement receipt as proof of your application submission.
• The authorities will verify the submitted documents. Once verified, the PAN card will be dispatched to the company’s registered office address.

The application fee for a PAN card varies depending on the company's location. For companies within India, the fee is Rs 110, while for companies outside India, the fee is Rs 1,020.

It is important to note that companies incorporated in India but generating income outside the country also need to quote PAN for several purposes, including business and banking activities.

Companies registered outside India

Companies registered outside of India can obtain a Permanent Account Number (PAN) by making an application in Form 49AA. This can be done online, but a copy of the signed application must also be sent to the NSDL office in India. The PAN card will be dispatched by courier to the address mentioned on the application.

The following documents must be submitted along with the application:

• A copy of the Certificate of Registration issued in the country where the company is located, duly attested by an Apostille (for countries which are signatories to the Hague Apostille Convention of 1961) or by the Indian embassy/consulate in the country.
• A copy of the registration certificate issued in India or approval granted to set up an office in India by Indian authorities.

The PAN card application fee is Rs 1,017 if the communication address is outside India. The payment can be made by demand draft, credit/debit card, or net banking.

The PAN number is generally allotted in 7 to 10 working days. An additional week should be allowed for printing and international delivery of the physical PAN card. The digital version, or ePAN, will be sent to the applicant's email as soon as the PAN number is allotted.

The Income Tax Department of India is the sole authority to decide the outcome of the PAN card application.

Foreign companies and tax rates

Foreign companies with business activities in the United States may be subject to US corporate taxes if they have a sufficient nexus or connection with the country. This includes companies that generate income from US sources or have a US trade or business. In such cases, foreign corporations may be required to file a US corporate income tax return (Form 1120-F) and apply for an Employer Identification Number (EIN) for tax-related purposes.

The US federal corporate tax rate is currently 21%, imposed on all entities treated as corporations. This rate has been in effect since 2018, following the passage of the Tax Cuts and Jobs Act of 2017. However, it is important to note that state and local taxes and rules can vary by jurisdiction, and corporations may be subject to additional taxes and requirements at those levels.

For example, nearly all states impose a tax on corporate income, with rates ranging from 1% to 12%. Additionally, certain localities also impose corporate income taxes. While the specific rules differ across states, many compute taxable income with reference to federal taxable income, making adjustments specific to their state.

Foreign corporations with business activities in the US are taxed on a net basis at normal graduated corporate tax rates. On the other hand, income not effectively connected with a US trade or business (non-effectively connected US-source income) is taxed at a flat rate of 30% on a gross basis, meaning no deductions are allowed.

It is worth noting that tax treaties between the US and foreign countries can impact the taxation of foreign corporations. These treaties may allocate the right to tax certain activities to another taxing jurisdiction or provide tax benefits to the foreign corporation.

In summary, foreign companies with business activities or income sources in the US are likely to have US tax obligations and should be aware of the applicable tax rates and requirements at both the federal and state levels, as well as the potential impact of tax treaties.

PAN card application process

To be clear, a US company does not need a PAN card. However, any company doing business in India, whether incorporated in India or abroad, does need a PAN card. A Permanent Account Number (PAN) is a crucial document for all taxpayers and is used by the Income Tax Department to track all financial transactions.

The PAN card application process for companies is as follows:

Step 1: Visit the NSDL Website

Go to the Paperless PAN Application Section on the NSDL website. Select Form 49A or 49AA from the 'Application Type' dropdown menu and select 'Company' from the 'Category' dropdown menu.

Step 2: Fill Out the Required Details

Fill out the title, name of the company, date of incorporation, email ID, and contact number. Complete the Captcha Code and proceed. A token number will be sent to your email, which you can use to continue the PAN application.

Step 3: Submit the Application Documents Physically

For company PAN applications, the e-KYC and e-sign facility is not available. The company's name, email, and contact number will be pre-filled. You only need to fill in your company's registration number.

Step 4: Mention the Source of Income

Select 'Income from Business/Profession' and choose the type of business from the menu. If you have other sources of income, such as house property or capital gains, mention those as well.

Step 5: Provide the Office Address

Enter your office address, which will also be your communication address in the PAN database. Other contact details will be pre-filled.

Step 6: Provide the Assessing Officer (AO) Code

Provide the AO Code, which is designated according to the area jurisdiction of your company's location. You can select 'Indian Citizen' and then choose the state and city.

Step 7: Submit the Required Documents

The Certificate of Registration issued by the Registrar of Companies can be used as both identity and address proof for your company.

Step 8: Sign the Declaration and Submit the Form

Indicate your relationship with the company (director or authorised signatory) and submit the form. Upload scanned copies of the required documents. Review your completed form and submit it.

Step 9: Pay the Fee

The fee is Rs. 107 for a communication address in India and Rs. 1,017 for an address outside India. Payment methods include demand draft, credit/debit card, or net banking. Only a director can make the payment for the company.

Step 10: Send the Acknowledgement Receipt

After successful payment, an acknowledgement receipt will be generated. Send this receipt, along with the copy of the registration certificate and demand draft (if applicable), to the NSDL office in Pune within 15 days of the online application.

The entire process can also be completed offline by downloading and filling out Form 49A, attaching the required documents, and submitting it to the NSDL/UTIITSL office.

Documents required for a PAN card

A Permanent Account Number (PAN) is an important document for all taxpayers. Companies incorporated in India or abroad need a PAN if they are doing business in India. Companies of Indian origin that generate income outside the country also need to quote PAN for several purposes.

The process to apply for a Company’s PAN Card is simple and can be done online. Companies incorporated in India have to fill out Form 49A to apply for a fresh PAN. The documents required for a PAN card for companies are as follows:

Documents Required for PAN Card for Companies:

Indian Registered Company:

Certificate of Registration issued by the Registrar of Companies.

Certificate of Registration issued by the Registrar of Limited Liability Partnership/Firms or Partnership deed.

Limited Liability Partnership:

Copy of Certificate of Registration issued by the Registrar of LLPs

Association of Persons (Trusts) in India:

Trust Deed or Certificate of Registration Number issued by the Charity Commissioner.

Company registered outside India:

• Registration Certificate issued by India or approval from Indian Authority to set up an office in India.
• Certificate of Registration from the applicant's country (attested by 'Apostille' or Indian Embassy/High Commission/Consulate).

Firm registered outside India:

• Copy of Certificate of Registration issued in the country where the applicant is located, duly attested by 'Apostille' or by the High Commission or Consulate in the country of the applicant’s residence, or by the Indian Embassy or any other authorised officials of overseas branches of Scheduled Banks registered in India.
• Copy of registration certificate issued in India or of approval granted to set up an office in India by Indian Authorities.

Documents Required for PAN Card for Foreign Companies:

Foreign companies must apostille all the required documents when applying for a PAN card. An apostille validates documents and is recognised in any country that participated in the 1961 Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents.

The required documents of the company can be sent to the following offices:

• The Legalization Office The Foreign and Commonwealth Office
• Secretary of State Office
• In the case of other countries, contact your broker or agent for guidance to assist you in the apostille process for your company.

Frequently asked questions