Sebi and CBDT have issued comprehensive clarifications to address difficulties faced by foreign portfolio investors in obtaining Permanent Account Numbers (PAN) under the revised onboarding framework. According to The Hindu BusinessLine, the move comes after delays in PAN issuance disrupted onboarding of new FPIs over the past month following changes to the common application form (CAF) and PAN application process introduced from April 1. The regulatory relief addresses operational hurdles that had triggered concerns over potential tax liability for custodians, banks and brokers acting on behalf of offshore funds. At least 20 newly registered FPIs were understood to be awaiting PAN allotment due to the bottleneck, highlighting the urgency of the regulatory intervention.
CBDT has now clarified that the name of the authorised signatory (AS) captured in the CAF would suffice for the representative assessee (RA)/authorised representative (AR) field in PAN applications. As reported by The Hindu BusinessLine, the tax department stated that the liability of the AS would be limited solely to the purpose of applying for PAN and no supporting documents for the AS, RA or AR would be required. CBDT has also relaxed other requirements to ease onboarding, including allowing FPI registration numbers to be furnished if PAN, Aadhaar or passport details of the authorised signatory are unavailable. The tax department further clarified that where Taxpayer Identification Number (TIN) or its equivalent is not applicable in a jurisdiction, applicants can fill the field with a default '0000000000' value. In cases where the FPI's mobile number is unavailable, a landline number may be furnished instead.
Zerodha CEO Nithin Kamath highlighted significant challenges faced by non-resident Indians (NRIs) while investing in India, calling the process 'far more painful' than necessary despite strong diaspora interest. According to reports from The Economic Times, Kamath wrote on X that 'a large population of NRIs are emotionally and financially interested in investing in India but face various obstacles' including difficulties in opening accounts and completing documentation. He emphasized that 'making life easier for NRIs could be one of the lowest-hanging fruits for attracting long-term capital into India' and noted that Zerodha has made several changes over the last year to ease the investment process for NRIs.
Ashish Kacholia of Lucky Invest supported Kamath's concerns, acknowledging that 'The KYC, Round tripping and Tax monsters that the Indian system is obsessed about are total capital flow killers from NRIs' and suggesting India needs a 'national objective of attracting USD 100 Billion per year' to systematically remove these barriers. However, veteran investor Shankar Sharma disagreed with the assessment, stating that 'I am a non resident 15 years and it has been a very smooth process. The broker and the custodian handle everything seamlessly I don't have to do anything at all except sign a few things just like any other foreign investor'. As reported by The Economic Times, Sharma described the investment process as 'smooth and seamless' for NRIs.
The regulatory relief comes as Sebi and CBDT actively engaged with stakeholders to ensure the PAN issuance framework remained smooth and investor-friendly. The CAF serves as a single-window system for FPI registration, PAN allotment, and opening of bank and demat accounts. Under the revised clarifications, SEBI actively engaged with CBDT to facilitate continued ease of allotment of PAN to FPIs following several difficulties expressed by concerned stakeholders in furnishing such information. The measures are aimed at ensuring continued ease of onboarding for foreign investors amid ongoing challenges in attracting foreign investment to Indian markets.
