The Significance of Non-residents and Foreign Companies Opening Bank Accounts in IFSC Gift City
Introduction
The International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT) is a tax-neutral enclave for the financial sector. In a recent development, the Finance Ministry has amended Income Tax Rules exempting non-residents and foreign companies opening bank accounts in IFSC Gift City from the requirement of submitting PAN and instead allowing them to file a declaration. This move aims to facilitate ease of doing business and attract more foreign investment to the Indian financial market.
Features and Objectives
The exemption from furnishing PAN to open bank accounts in IFSC Gift City comes with certain conditions. Non-residents and foreign companies should file a declaration in Form 60 and ensure they have no tax liabilities in India. This initiative aims to make it easier for overseas companies, NRIs, and other non-residents to open bank accounts in IFSC banks.
The main objective of this relaxation is to boost the liability/deposits side as well as the retail business segment of IFSC banks. It encourages foreign companies to establish a presence in IFSC Gift City by alleviating the administrative burden of obtaining PAN, thereby promoting financial activities and transactions within the center.
Effects and Benefits
The amendment in the Income Tax Rules has several positive effects. Firstly, it enhances the ease of doing business for non-residents and foreign companies, giving them a hassle-free experience in opening bank accounts. This will attract more investments and foster a conducive environment for financial transactions.
Secondly, the boost in the liability/deposits side and the retail business segment of IFSC banks will contribute to the overall growth of the financial sector in IFSC Gift City. With easier access to banking services, more foreign companies and NRIs can actively participate and contribute to the Indian financial market.
Furthermore, this initiative aligns with the government’s vision of promoting IFSC Gift City as a global financial hub. By exempting PAN requirements, it creates a level playing field for foreign entities while adhering to international financial standards.
Pros:
Eases the process of opening bank accounts for non-residents and foreign companies in IFSC Gift City.
Attracts more foreign investment to the Indian financial market.
Boosts the liability/deposits side and the retail business segment of IFSC banks.
Promotes the vision of IFSC Gift City as a global financial hub.
Cons:
May raise concerns about potential misuse of the exemption by entities with undisclosed tax liabilities.
Could require additional scrutiny and monitoring to ensure compliance with tax regulations.
Fun Fact:
IFSC Gift City is the first International Financial Services Centre in India, established in 2015. It aims to function as a global financial hub on par with other major financial centers around the world.
Mutiple Choice Questions
1. What is the latest amendment made by the Finance Ministry regarding non-residents opening bank accounts in IFSC Gift City?
a) Non-residents and foreign companies will not have to furnish PAN while opening a bank account in IFSC Gift City.
b) Non-residents and foreign companies will have to submit PAN while opening a bank account in IFSC Gift City.
c) Non-residents and foreign companies can open a bank account in IFSC Gift City without submitting any declaration.
d) Non-residents and foreign companies can open a bank account in IFSC Gift City without any tax liabilities in India.
Explanation: The correct answer is option a) Non-residents and foreign companies will not have to furnish PAN while opening a bank account in IFSC Gift City. The Finance Ministry has amended Income Tax Rules exempting non-residents opening a bank account from the requirement of submitting PAN. Instead, they can file a declaration in Form 60 and should not have any tax liabilities in India.
2. What is the purpose of Gujarat International Finance Tec-City (GIFT)-IFSC?
a) To promote tax-neutral enclaves for the financial sector.
b) To facilitate tax evasion for foreign companies.
c) To encourage non-residents to open bank accounts in India.
d) To promote retail business segments in IFSC banks.
Explanation: The correct answer is option a) To promote tax-neutral enclaves for the financial sector. GIFT-IFSC is being promoted as a tax-neutral enclave for the financial sector, aiming to attract non-residents, foreign companies, and NRIs to open bank accounts in IFSC banks.
3. How will the latest relaxation in PAN requirements benefit IFSC banks?
a) It will boost the liability/deposits side of IFSC banks.
b) It will boost the retail business segment of IFSC banks.
c) It will encourage non-residents to open bank accounts in IFSC banks.
d) All of the above.
Explanation: The correct answer is option d) All of the above. The relaxation in PAN requirements for non-residents and foreign companies opening bank accounts in IFSC Gift City will benefit IFSC banks by boosting their liability/deposits side as well as the retail business segment. It will also encourage non-residents, NRIs, and other foreign companies to open bank accounts with IFSC banks.
4. Which form should a non-resident or foreign company file while opening a bank account in IFSC Gift City?
a) Form 60
b) Form 61
c) Form 62
d) Form 63
Explanation: The correct answer is option a) Form 60. Non-residents and foreign companies opening a bank account in IFSC Gift City should file a declaration in Form 60 according to the latest amendment made by the Finance Ministry.
Brief Summary | UPSC – IAS
Non-residents and foreign companies opening bank accounts in the IFSC Gift City will no longer be required to furnish a PAN, but instead can file a declaration. The Finance Ministry has amended Income Tax Rules to exempt non-residents from submitting a PAN and instead they can file a declaration in Form 60. This change aims to make it easier for foreign companies, NRIs, and other non-residents to open bank accounts in the IFSC. This is expected to boost the liability/deposits side as well as the retail business segment of IFSC banks.
