PAN and Return-Filing Obligations for NRIs in India

Two obligations, two different triggers

Holding a PAN and filing an Indian return are separate duties, and conflating them is where most non-resident compliance goes wrong.

A PAN is an identifier. It is the number the Indian system uses to attach a transaction, a deduction or a payment to a person. A return is an annual account of income. You can be required to hold the first without owing anything, and required to file the second even when no tax is payable.

The asymmetry that makes this matter is mechanical. Tax deducted at source from payments to a non-resident is generally deducted from the sum paid, at flat rates, without the benefit of the basic exemption limit and often without relief for cost or expense. Tax actually due is computed on net income after the exemption limit and after any treaty relief. The two figures rarely coincide, and the gap moves in your favour only if you file.

One point of orientation before the detail. Returns being filed in mid-2026 relate to the year ended 31 March 2026 — assessment year 2026-27 — and are governed by the Income-tax Act 1961. Income arising from 1 April 2026 onwards falls under the Income-tax Act 2025, which came into force on that date and speaks of a "tax year" rather than a previous year and assessment year. Where the section numbers differ, both are given below.

When a PAN is actually mandatory

Under section 262 of the Income-tax Act 2025 — section 139A of the 1961 Act — you must apply for a PAN if your total income for the year exceeded the maximum amount not chargeable to income-tax, if you carry on a business or profession whose sales, turnover or gross receipts are or are likely to exceed Rs 5,00,000, or if you are required to furnish a return for any other reason.

The financial-transaction trigger in the same section — Rs 2,50,000 in a year — is drafted for a resident other than an individual, so it does not catch an individual NRI.

Beyond the entry conditions, the rules prescribe a list of transactions in which a PAN must be quoted. Non-residents sit outside most of that list, but not all of it. Opening a bank account, opening a demat account, subscribing for mutual fund units or company debentures above the prescribed value, placing a time deposit, paying life insurance premiums, contracting for securities, dealing in unlisted shares, and buying or selling immovable property above the prescribed value all remain within it. The Income-tax Rules 2026 replaced the 1962 Rules from 1 April 2026 and reset several of the monetary thresholds, so verify the current figure rather than working from a remembered one.

Aadhaar is a related but separate question. The Act requires an Aadhaar number to be quoted in the PAN application and in the return, with an unlinked PAN becoming inoperative. A notification issued in 2017 disapplies that requirement for an individual who is a non-resident and does not possess an Aadhaar number. If you obtained one during an earlier period in India, the exemption does not reach you.

What the absence of a PAN does to your deductions

Section 206AA requires that where a person entitled to receive a sum on which tax is deductible fails to furnish a PAN, tax is deducted at the higher of the rate specified in the relevant provision of the Act, the rate in force, or twenty per cent.

A relaxation exists, and it is narrower than it is usually described. It applies to payments in the nature of interest, royalty, fees for technical services, dividend, and payments on transfer of any capital asset, and only if you furnish the deductor with your name, email and contact number, your address in your country of residence, a certificate of residence from that government where its law provides for one, and your tax identification number there. Rent is not on that list. An NRI landlord without a PAN has no relaxation to fall back on.

Two further consequences are easy to miss. A certificate for lower or nil deduction under section 197 cannot be granted on an application that does not carry a PAN, and a self-declaration under section 197A is invalid without one. The absence of a PAN therefore closes both routes for reducing deduction prospectively, which is precisely when reduction is worth having. Our guide to NRI TDS rates by income type sets out the rates those routes are working against.

Filing when nothing is payable

The base obligation, in section 263(1) of the 2025 Act and section 139(1) of the 1961 Act, is to file where total income exceeded the maximum amount not chargeable to income-tax.

For assessment year 2026-27 that threshold is Rs 4,00,000 under the default regime in section 115BAC, or Rs 2,50,000 if you opt out of it. The higher age-based limits of Rs 3,00,000 and Rs 5,00,000 are written for resident senior and super-senior citizens, so an NRI of any age sits on Rs 2,50,000 in the old regime. The rebate under section 87A is likewise a resident-only relief.

The provision that catches people is the way the threshold is tested. It is applied to income computed without giving effect to Chapter VI-A deductions or to the capital-gains rollover reliefs in sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB. Sell an Indian flat, reinvest the whole gain in a new one under section 54, arrive at nil taxable income — and the filing obligation still stands, because the test looks at the figure before the relief. The same logic runs through capital gains and TDS on an NRI property sale.

One obligation that does not apply is worth naming. The requirement to file purely because you hold foreign assets or have signing authority over a foreign account is drafted for "a person, being a resident other than not ordinarily resident". Non-residents and RNORs are outside it — which is a narrower carve-out than it sounds, since other disclosure duties can arise on return to India. See foreign asset disclosure for returning residents.

The exemption that is narrower than it sounds

Section 216 of the 2025 Act, carrying forward section 115G of the 1961 Act, says it is not necessary for a non-resident Indian to furnish a return if total income for the year consisted only of investment income, or long-term capital gains, or both, from foreign exchange assets, and tax has been deducted from that income.

A foreign exchange asset means a specified asset acquired or subscribed to in convertible foreign exchange: shares in an Indian company, debentures of an Indian company that is not a private company, deposits with such a company, Central Government securities, and other notified assets.

That definition does a great deal of work. Rent from Indian property, gains on Indian property, business income, and income from assets bought with rupee funds all fall outside it — and a single stream of income outside the definition takes the whole year outside the relief.

Even where it applies, treat it sceptically. It removes the obligation to file, not the tax. Deduction at twenty per cent on investment income, or thirty per cent where income falls into the residual category, is frequently more than the tax actually due once the exemption limit and any treaty relief are applied. Electing not to file is electing not to reclaim.

Which form, and by when

For a non-resident individual, the department's guidance on returns applicable for assessment year 2026-27 points to ITR-2 where income falls under any head other than profits and gains of business or profession, and ITR-3 where there is business or professional income. ITR-1 is not available to a non-resident.

The statutory due date table, in Explanation 2 to section 139(1) and mirrored in section 263(1)(c), sets dates in the year following the year of income:

Most NRIs with rent, interest, dividends and capital gains fall into the residual row. Check which row applies to you rather than assuming.

What missing the date actually costs

The late fee under section 234F is Rs 5,000, capped at Rs 1,000 where total income does not exceed Rs 5,00,000, and no fee arises where you were not liable to file at all. Interest under section 234A runs at 1% per month on unpaid tax from the due date. Neither is usually the real cost.

The real cost is the closing of the windows. A belated return may be furnished within nine months from the end of the year — 31 December — or before assessment is completed, whichever is earlier. A revised return currently runs longer, to twelve months from the end of the year, with a late-revision fee once you pass the nine-month point.

Then comes the trap. The updated return runs for forty-eight months from the end of the financial year following the tax year, which sounds generous, and it is the route people reach for when they discover an unfiled year. But it is expressly unavailable where it results in a refund that was not otherwise due, or increases a refund already claimed. It exists so that taxpayers can declare additional income. It cannot recover over-deducted TDS.

Once the original and belated windows have passed, what remains is an application for condonation of delay, decided at the discretion of the tax authorities within published monetary and time limits. It is a concession, not a right, and it should never be part of a plan.

Reducing the deduction rather than reclaiming it

Section 195 requires deduction at the rates in force from sums chargeable to tax in the hands of a non-resident. The residual rate for other income is thirty per cent; investment income of a non-resident Indian citizen is twenty per cent; most long-term capital gains sit at 12.5 per cent and short-term gains under section 111A at twenty per cent. There is no basic exemption threshold in any of them.

Two forward-looking mechanisms exist. The payer may apply under section 195(2) for a determination of the proportion of a payment that is actually chargeable — relevant where a buyer would otherwise withhold on the whole sale consideration rather than on the gain. And you may apply for a certificate under section 197 fixing a lower or nil rate. Both need to be in place before the payment, and the second needs a PAN.

Where a treaty gives a lower rate, that route runs through a tax residency certificate and the associated declaration, covered in DTAA relief and the Tax Residency Certificate. Getting the deduction right at source is almost always cheaper than reclaiming it eighteen months later.

Compliance caveat

This guide describes the PAN and return-filing framework in general terms as it stood in July 2026, drawing on sections 262, 263 and 216 of the Income-tax Act 2025 and sections 139, 139A, 195, 206AA and 234F of the Income-tax Act 1961. It does not cover the position of companies, firms or trusts, the taxation of particular income streams, treaty tie-breaker analysis, FEMA residence — which is decided separately and can differ from your income-tax status — or the reporting rules applying in your country of residence, which may require the same income to be declared there. Rates, thresholds and time limits change at each Finance Act and were reset again when the Income-tax Rules 2026 replaced the 1962 Rules from 1 April 2026. This is a simplified guide, not tax advice. Global Investments is not authorised by the Financial Conduct Authority or by the Securities and Exchange Board of India. Confirm your own position with a qualified Indian tax adviser before filing or acting on anything set out here.

How Global Investments can help

Most of the money lost on this topic is lost quietly, through deduction at a headline rate on income that was never going to attract that much tax, followed by a year in which nobody files. Our advisers work with internationally mobile clients to establish whether a filing obligation exists at all, which of the statutory triggers applies in their case, and whether a lower-deduction route is worth pursuing before the next payment is made rather than reclaimed afterwards. Where another country also taxes the same income, we look at the interaction between the two systems and coordinate with Indian tax specialists on the domestic filing itself, so the treaty position and the return tell the same story.