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The Central Board of Direct Taxes (CBDT) has laid down the procedure for Permanent Account Number (PAN) allotment to the Foreign Portfolio Investors (FPIs) through the Common Application Form (CAF). The Common Application Form (CAF) was recently notified by the Securities and Exchange Board of India (SEBI) on January 27, 2020, for simplifying the registration process for FPIs. SEBI notified CAF for registration of Foreign Portfolio Investors (FPIs), for carrying out KYC and for opening Bank and Demat accounts.
Through the Common Application Form (CAF), the government has done away with the dual application requirement. As per current norms, FPIs have to make two separate applications one to SEBI and the other one to Central Board of Direct Taxes (CBDT) for Permanent Account Number (PAN). This dual application requirement used to increase the time required for FPI registration by about three months. The introduction of the Common Application Form (CAF) would significantly reduce the processing timelines for foreign investors.
In the wake of Common Application Form (CAF) notified by SEBI, the Central Board of Direct Taxes (CBDT) on February 7, 2020, laid down the classes of persons, to which Common Application Form (CAF) will apply, the format and procedure for PAN allotment.
The Common Application Form (CAF) as per CBDTs notification will apply to New Foreign Portfolio Investors (FPI). The applicants seeking FPI registration and PAN allotment shall duly fill CAF and provide supporting documents and applicable fees.
The procedure for PAN allotment as notified by CBDT requires the applicant to upload the application for allotment of PAN in CAF as specified by the Ministry of Finance, Department of Economic Affairs (SEBI). Next, after due examination and generation of FPI Registration certificate, SEBI shall forward the data in form 49AA to prescribed Income Tax Authority through the signature of Authorised Signatories of its Designated Depository Participants (DDPs).
The Common Application Form (CAF) notified by SEBI is much easier to navigate than the previous regime. The form is a culmination of three forms- details required by the tax department, SEBI requirements and Foreign Account Tax Compliance Act (Fatca) documents.
SEBI’s notification of Common Application Form (CAF) followed by CBDTs notification shall simplify the process of FPI registration and PAN allotment for FPIs. Now, FPIs can enjoy seamless access to Indian capital markets as Common Application Form (CAF) will apply to them, which would eventually enhance their operational flexibility.