The Central Board of Direct Taxes (CBDT) has issued a clarification about Income Tax Clearance Certificate for Indians travelling abroad, seeking to dispel misinformation that individuals must secure an ITCC before leaving the country.
What is an Income Tax Clearance Certificate?
It is a document verifying that an individual has cleared all their tax duties and is not responsible for paying any taxes, and will take charge of any tax liabilities in the future.
Clarification on ITCC Requirements
The CBDT’s clarification was prompted by misinterpretations of amendments made to Section 230 of the Income-tax Act, 1961, through the Finance (No. 2) Act, 2024. It emphasised that ITCC is not universally applicable and is only necessary for specific individuals under certain conditions:
Financial irregularities: Where a person is involved in serious financial irregularities and their presence is necessary in investigation of cases under the Income Tax Act or the Wealth-Tax Act and it is likely that a tax demand will be raised against them.
Outstanding tax arrears: Individuals with direct tax arrears exceeding Rs 10 lakh that have not been stayed by any authority are also required to secure the ITCC. This provision ensures that those with substantial unpaid taxes are accounted for before they leave the country.
The CBDT said that an ITCC can only be asked for after recording the reasons for doing so and obtaining approval from a Principal Chief Commissioner or Chief Commissioner of Income Tax.
ITCC has been part of the tax framework since 2003. Amendments introduced in 2024 do not fundamentally alter existing provisions but clarify the circumstances under which an ITCC is necessary. The amendments include references to black money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, ensuring that liabilities under this Act are treated similarly to those under the Income Tax Act.
How to get an Income Tax Clearance certificate
To obtain ITCC, follow these steps:
Start by submitting a formal declaration to your employer in India or the individual/entity from whom you receive income. This step initiates your request for an ITCC.
If you are a Non-Resident Indian (NRI), you must provide an undertaking using Form 30A when applying for the ITCC. This form, which should be submitted by your employer or the source of your income in India, declares their responsibility for any tax liabilities that might arise after you leave the country.
After reviewing your application, the tax officer will issue the ITCC on Form 30B. This certificate will detail the validity and confirm that you have met all your tax obligations up to that point.
First Published: Aug 21 2024 | 11:00 AM IST
