SKP Tax Alert
Volume 10 Issue 3 | 6 April 2017
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 Law[1]

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 appropriate action.

[1] Governed by ‘The Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016
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