Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by the Income Tax Department of India to any "person" to facilitate him in making tax payments filing, returns and claiming refunds. The number, along with other relevant details, is printed on a card called PAN card.
QFIs who have a PAN card would be eligible for tax deduction at source (TDS) as per the rates applicable in the Double Taxation Avoidance Treaty (DTAA) of the country of which the QFI is a resident, if it is more beneficial than the rate prescribed under the domestic law.
If a QFI has not obtained a PAN card it would be subject to a higher rate of tax deduction under Section 206 AA of Income Tax Act, 1961.
In order to facilitate investments by QFIs, the Qualified Depository Participants (QDPs) have been assigned the responsibility to act as a single point of contact for QFIs for all purposes including tax.
For tax purposes, a QDP will facilitate the QFI to obtain a PAN card. QDPs will be responsible for any withholding tax in India before making remittance to QFIs.
A QDP may ensure that the broker engaged by it for undertaking QFI transactions deducts and deposits tax at source failing which the QDP should deduct and deposit the tax on such transactions.
QFIs can claim refund from Income Tax Department for which the QFI would have to file its return of Income in India for that year.
The capital gains arising on sale of shares shall be computed by converting the cost of acquisition, expenditure incurred and full value of consideration in the same currency, as was initially utilized for purchase of shares and the gains so computed
shall be reconverted in India currency.
The deductibility of expenses would depend on the fact that whether the income on the sale of shares is treated as business income or capital gains. In general if the income is treated as capital gains expenses like brokerage fees would be allowed.