The Income Tax department which is probing all financial transactions of the Indian Premier League (IPL) has advised all foreign players to obtain PAN cards, failing which they will have to pay penal tax on their cricket related earnings in India.
Permanent Account Numbers are issued by the I-T Department to track all earnings and tax deductions.
A new rule notified by the Central Board of Direct Taxes (CBDT) and effective from April this year makes it mandatory for all foreign nationals to register for PAN cards.
All cricket players who have not procured a PAN card will have 20 per cent of their earnings deducted as tax.
This is double the 10 percent TDS ( Tax Deducted at Source) recovered from PAN card holders.
"The law will also apply to all non-residents in respect of payments or remittances liable to TDS," the notification states.
The new clause has to be read with section 115BBA of the Income Tax Act which ensures tax on non-resident sportsmen or sports associations where the total income of the player, who is not a citizen of India and is a non-resident, includes any income received or receivable by way of participation in any game in the country, a senior I-T officer said.
For example, West Indian all rounder Kieron Pollard who is paid Rs 3.42 crore to play for Mukesh Ambani's team Mumbai Indians, will have to pay almost Rs 64 lakh as penal tax for not having a PAN card.
New Zealander Shane Bond who is the pace-bowling spearhead for Shah Rukh Khan's team Kolkata Knight Riders, will also have to pay a similar amount by way of TDS till he obtains a PAN card.
The rules also cover sports commentators, umpires, team coaches, physiotherapists, TV anchors and sports columnists for their earnings in India.
The exact amount of penalty will depend on the actual payment made to individual foreign players.
Top I-T sources said the department in its probe is looking for documents where the foreign players could have participated in advertising assignments and written articles in newspapers and journals during the IPL.
Those earnings are also taxable.
"All deductees, including non-residents having transactions in India liable to TDS, are advised to obtain PAN by March 31, 2010 and communicate the same to their deductors before tax is actually deducted on transactions after that date," the CBDT notification said.
I-T officials say it takes only 10-15 days to procure a PAN cards. IPL franchisees and their accountants can help foreign players who are not familiar with Indian tax requirements.