Not All Persons Are Required To Obtain Tax Clearance Certificate Before Leaving India: CBDT

The Central Board of Direct Taxes (CBDT) has issued a clarification in respect of the income-tax clearance certificate (ITCC).

“It is being erroneously reported that all Indian citizens must obtain an income-tax clearance certificate (ITCC) before leaving the country-a position that is factually incorrect,” the Board clarified.

Section 230 (1A) of the Income-tax Act, 1961, relates to the obtaining of a tax clearance certificate, in certain circumstances, by persons domiciled in India. The provision, as it stands, came into force through the Finance Act, 2003, w.e.f. 1.6.2003. The Finance (No. 2) Act, 2024, has made only an amendment in Section 230(1A) of the Act, in which reference to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the 'Black Money Act') has been inserted in the said Section. This insertion has been made to also cover the liabilities under the Black Money Act in the same manner as the liabilities under the Income-tax Act, 1961, and other Acts dealing with direct taxes for the purpose of Section 230(1A) of the Income-tax Act, 1961.

There appears to be misinformation about the said amendment emanating from an incorrect interpretation of the amendment. It is being erroneously reported that all Indian citizens must obtain an income-tax clearance certificate (ITCC) before leaving the country. This position is factually incorrect.

The CBDT has specified that the tax clearance certificate under Section 230(1A) of the Act may be required to be obtained by persons domiciled in India only in two circumstances.

Firstly, where the person is involved in serious financial irregularities and his presence is necessary in the investigation of cases under the Income-tax Act or the Wealth-tax Act, it is likely that a tax demand will be raised against him.

Secondly, where the person has direct tax arrears exceeding Rs. 10 lakh outstanding against him that have not been stayed by any authority,.

A person can be asked to obtain a tax clearance certificate only after recording the reasons for the same and after taking approval from the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax.

The CBDT reiterated that the ITCC under Section 230(1A) of the Income Tax Act is needed by residents domiciled in India only in rare cases, such as (a) where a person is involved in serious financial irregularities or (b) where a tax demand of more than Rs. 10 lakh is pending and is not stayed by any authority.

Date: 20/08/2024

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