Table of Contents
- Cbdt Clarifies Income Tax Clearance Certificate Not Required For Travel Abroad
- 1. Union Budget Proposal:
- 2. Existing Provisions On Income Tax Clearance Certificate
- 3. Cbdt Clarifies Income Tax Clearance Certificate Not Required For Travel Abroad
- 4. Summary On Income Tax Clearance Certificate For Traveling Abroad
CBDT clarifies Income Tax Clearance Certificate Not required for travel abroad
1. Union Budget Proposal:
The Union Budget initially raised concerns by proposing a mandatory Income Tax Clearance Certificate for all residents traveling abroad. However, it was later clarified that this requirement is limited to specific cases, particularly under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The amendment in the Finance Bill ensures that cases under the Black Money Act would now be covered by the requirement to obtain a Income Tax Clearance Certificate.
2. Existing Provisions on Income Tax Clearance Certificate
Section 230 of the Income Tax Act, 1961, stipulates that not all individuals need to obtain a Income Tax Clearance Certificate. According to the Central Board of Direct Taxes Instruction No. 1/2004, dated February 5, 2004, a Income Tax Clearance Certificate is only necessary for individuals who:
- Are involved in serious financial irregularities.
- Are under investigation under the Income Tax or Wealth Tax Act, where their presence is necessary and a tax demand is likely to be raised.
- Have direct tax arrears exceeding ₹10 lakh, where these arrears have not been stayed by any authority.
These provisions have been in place since 2003, and the recent amendments do not change the general rule that only certain individuals need to obtain a TCC under specific circumstances.
3. CBDT clarifies Income Tax Clearance Certificate Not required for travel abroad
The Central Board of Direct Taxes Clarified that the requirement to obtain a Income Tax Clearance Certificate before traveling abroad is not mandatory for all Indian residents. This requirement is specifically applicable to individuals accused of serious financial irregularities or those with significant direct tax arrears exceeding INR 10,00,000/-, provided these arrears have not been stayed by any authority.
Central Board of Direct Taxes said is being erroneously reported that Indian citizens must obtain Income Tax Clearance Certificate before leaving the Indian Nation country. This position is factually incorrect.
The Finance Ministry & The Central Board of Direct Taxes have clarified that the requirement for Indian citizens to obtain an Income Tax Clearance Certificate before leaving the country is not mandatory for everyone. This requirement is only applicable in specific and rare cases, such as when an individual is involved in serious financial irregularities or has direct tax arrears exceeding INR 10 lakh that have not been stayed by any authority.
The said provision, as it stands, came on the statute via Finance Act. Finance (No.2) Act, 2024, has made only an amendment in Section 230(1A) of the Income-tax Act, 1961, vide which, reference of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the 'Black Money Act') has been inserted in said Section. “This insertion under Income-tax Act, 1961 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,”
The confusion arose from a recent amendment to Section 230(1A) of the Income Tax Act, 1961, introduced through the Finance (No. 2) Act, 2024. This amendment included references to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. But, the Finance Ministry and the Central Board of Direct Taxes emphasized that this change does not alter existing rule that only certain individuals need to obtain an Income Tax Clearance Certificate under specific situation. This requirement has been in place since 2003 and has not been expanded to cover all citizens
4. Summary on Income Tax Clearance Certificate for traveling abroad
The Finance Ministry & CBDT has clarified that income-tax clearance certificates are not needed by residents domiciled in India only in few case, such as:
• Where a tax demand of more than INR 10 lakh is pending and not stayed by any authority
• Where a person is involved in serious financial irregularities
* Are under investigation under the Income Tax Act, 1961 or Wealth Tax Act, where their presence is necessary and a tax demand is likely to be raised.
