JSA Prism | Direct Tax | June 2026

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Permanent Account Number Exemptions and Relaxations for International Financial Services Centre Banking Transactions

The International Financial Services Centre (“IFSC”) established in the GIFT City, Gujarat, continues to offer significant regulatory advantages for international banking and financial services operations. With the implementation of the Income-tax Act, 2025 and the Income-tax Rules, 2026 (“IT Rules 2026”) from April 1, 2026, specific relaxations have been introduced for persons undertaking banking transactions with IFSC Banking Units (“IBUs”). These relaxations are particularly relevant for your operations and investment structures involving IBUs.

This alert outlines the Permanent Account Number (“PAN”) exemptions and alternative compliance mechanisms available for foreign companies, non-residents and other persons undertaking specified banking transactions with IBUs and explains how these may benefit your existing or proposed IFSC structures.

Definition of IBUs

Under Rule 159(7)(a) of the IT Rules 2026, an ‘IFSC banking unit’ means a financial institution defined under section 3(1)(c) of the International Financial Services Centres Authority Act, 2019, that is licensed or permitted by the International Financial Services Centres Authority to undertake permissible activities under the International Financial Services Centres Authority (Banking) Regulations, 2020.

PAN exemption for foreign companies and non-residents

If your entity is a foreign company or a non-resident (other than a company) undertaking specified banking transactions with an IBU and does not have income chargeable to tax in India, you may be exempt from the obligation to obtain a PAN, subject to prescribed declarations and conditions. This exemption is particularly beneficial for foreign investment structures, treasury centres and multinational groups using GIFT City-based banking platforms.

The specified transactions covered under this exemption that may be relevant to operations include:

• opening of a bank account (other than a time deposit account or basic savings bank deposit account) with a banking company or eligible co-operative bank, including an IBU in the IFSC;
• making a time deposit exceeding INR 50,000 (Indian Rupees fifty thousand), or aggregate time deposits exceeding INR 5,00,000 (Indian Rupees five lakh) during a financial year, with a bank, co-operative bank, post office, Nidhi company, non-banking financial company, or IBU.

Declaration and verification requirements

If your entity is a foreign company, the Form No. 97 declaration must be verified by an authorized signatory i.e., AR/RAs and must contain particulars of the transaction. Please note that Tax Identification Number (TIN) details remain mandatory for foreign companies. The AR/RAs shall assume liability for any false declaration in the form. We recommend ensuring that authorized signatories are fully briefed on these compliance obligations.

Conclusion

Foreign companies and non-residents transacting with IBUs without taxable Indian income can avoid PAN requirements by filing Form No. 97 declarations for given specified transactions. However, foreign companies must still furnish their Taxpayer Identification Number in the declaration, and the authorized signatory bears personal liability for its accuracy, therefore the AR/ RAs may seek contractual protection in this regard. Accordingly, reviewing the existing IBU banking arrangements, ensuring Form No. 97 declarations are correct, and briefing authorized signatories on their compliance obligations under these declarations are recommended.

This Prism has been prepared by:

Kumarmanglam Vijay Partner and Head of Practice Direct Tax

Harshita Agrawal Associate

Maitri Gala Associate

For more details, please contact km@jsalaw.com