Expatriates and foreign nationals working in India may have to
obtain an Aadhaar number by 31 July 2017, despite certain
relaxations from the government
Aadhaar is a unique identification number in India that is
obtained by individuals. The government is increasingly using
Aadhaar to track the economic activity of individuals and promoting
its socio-economic welfare measures. The Finance Act, 2017 has made
it mandatory for taxpayers to quote their Aadhaar number or the
Enrolment ID of the Aadhaar application form for filing tax returns
in India. Taxpayers are also required to link their Aadhaar number
to their Permanent Account Number (PAN). These requirements come
into effect from 1 July 2017.
The Central Board of Direct Taxes (CBDT), through a Press
Release issued on 5 April 2017, has clarified that the above
requirements are applicable only to those individuals who are
eligible to obtain Aadhaar under the Aadhaar
The Aadhaar law provides that to obtain Aadhaar, the individual
should have resided in India for 182 days or more, in aggregate, in
the 12 months immediately preceding the date of application for
enrolment for Aadhaar. Thus, individuals based outside India but
deriving income from India are not eligible and therefore not
required to obtain Aadhaar.
However, this requirement is likely to significantly
affect expatriate employees and foreign nationals working in India
for a considerable period of time. Once a non-resident
individual is present in India for a period of 182 days or more in
any 12-month period (which could be a likely situation in certain
expatriate arrangements), such non-resident individual becomes
eligible to obtain Aadhaar and, by implication, is required to
obtain Aadhaar to file his tax returns in India.
The failure to obtain Aadhaar and linking it to the PAN could
make the PAN invalid. This could require higher tax withholding on
income earned from India. Furthermore, the concerned individual may
not be able to file his tax returns in India.
Therefore, it is important that the Aadhaar enrolment
activity for the expatriates and foreign nationals working in India
is completed before 31 July 2017, which is the due date for filing
of tax returns for the Indian tax year ending on 31 March
2017. Aadhaar enrolment will require individuals to
provide a proof of identity, proof of address and proof of date of
birth (optional in certain cases). In the case of practical
difficulties in furnishing valid evidence for any of the above,
taxpayers may have to consult the Aadhaar enrolment centre for
1 Governed by 'The Aadhaar (Targeted Delivery of
Financial and Other Subsidies, Benefits and Services) Act,
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This note intends to analyse the draft notification issued by the CBDT under the third proviso to the clause (38) of section 10 of the Income Tax Act, 1961 highlight its impact on the primary and secondary market transactions.
In a recent case, the Ahmedabad Tribunal ruled that reimbursement made by an Indian company to a foreign company towards the cost of employees seconded by it to the Indian company does not attract tax withholding in India.
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