MCA issues Circular on Applicability of PAN requirement for Foreign Nationals as Director of Company at the time of Incorporation

MCA issues General Circular No. 16/2014 Dated 10.06.2014 for Applicability of PAN requirement  for Foreign Nationals as Director of the Company at the time of Incorporation.

As per this circular, PAN is compulsory for a Foreign National who is a subscriber / promoter at the time of incorporation of the company. However, if the Foreign National does not possess a PAN, then he / she is required to furnish a declaration / undertaking in prescribed format as an attachment to Form INC – 7 at the time of incorporation of the company.

Further, a National Director of the proposed company shall be required to furnish the PAN details at the time of incorporation.

Prescribed Format is Produced hereunder for ready reference. The said undertaking / declaration is to be attached with Form INC – 7 at the time of incorporation of the new company.

Undertaking

I. . . . . . . . . . . . . (name) . . . . . . . . . . . . ., son of . . . . . . . . . . . . . (father’s name) . . . . . . . . . . . ., citizen of . . . . . . . . . . . . . (nationality) R/o (Address) . . . . . . . . . . . . . having passport No. . . . . . . . . . . . . . (passport Number) . . . . . . . . . . . . . hereby declare as under:

 (i)    That I am not required to obtain Income Tax Permanent Account Number (PAN) under the provisions of Income Tax Act, 1961;

(ii)   That in view of the above I have not been issued any PAN; and

(iii)  That I undertake to furnish to the Registrar of Companies (mention jurisdiction) details of my PAN as soon as a Permanent Account Number is allotted to me.

Our Analysis: This Clarification has come as a relief for foreign nationals / foreign promoters. The Ministry has relaxed the norms for applicability of PAN to foreign nationals / foreign promoters. By giving the above declaration / undertaking, the foreign nationals / foreign promoters are not required to apply for the PAN in India. However, the responsibility shifts to the national promoter / national director to comply with the PAN formalities at the time of Incorporation of a New Company under the Companies Act 2013. Further, it is also mandatory to have one local / national director in newly incorporated companies under the Companies Act 2013.

(Author, Jinesh Bhagdev, Practicing Chartered Accountant, Mumbai can be contacted at jinesh@jbhagdev.com and Co- author Mr. Anandkumar Tibrewala can be contacted as anand@adcoindia.co.in)