Income tax clearance certificate not mandatory for all abroad travellers; Centre clarifies post social media outrage

The Union government clarified on Sunday that tax clearance certificates would be mandatory only for those accused of financial irregularities or who have substantial tax arrears. The clarification comes after a Budget 2024 proposal that would have made them mandatory for all overseas travellers sparked outrage on social media.

In the Finance Bill 2024, the Ministry of Finance has proposed to add the reference of the Black Money Act, 2015 to the list of Acts. This Act requires anyone to clear their financial liabilities and receive the tax clearance certificate.

The government clarified, that the proposed amendment does not pertain to all. “The proposed amendment does not require all the residents to obtain the tax clearance certificate,” said the ministry, reported the PTI.

What does section 230; Income-tax Act, 1961 say

Section 230 of the Income-tax Act, 1961, does not mandate every person to obtain a tax clearance certificate. “Only in the case of certain persons, in respect of whom circumstances exist, ” that necessitate the requirement for the certificate, will be required to obtain the tax clearance certificate, reported the PTI.

A 2004 notification by the Income Tax Department had specified that the tax clearance certificate is only required by those domiciled in India, “only in certain circumstances,” said the ministry.

Who needs the tax clearance certificate

Involvement in Serious Financial Irregularities: If a person is suspected of serious financial misconduct and their presence is crucial for investigations under the Income-tax Act or the Wealth-tax Act, and if it’s likely that a tax demand will be raised against them, they need to obtain a tax clearance certificate.

Outstanding Direct Tax Arrears: If a person has direct tax arrears exceeding ₹10 lakh that have not been stayed by any authority, they must obtain a tax clearance certificate.

A person can be asked to obtain a tax clearance certificate, only after the reasons for the same have been recorded, the Income Tax department stated . An approval from the Principal Chief Commissioner of income tax or Chief Commissioner of income tax, is also required.

The Income Tax authorities issuing the certificate must state that the concerned person has no liabilities under the Income-tax Act, or the Wealth-tax Act, 1957, or the Gift-tax Act, 1958, or the Expenditure-tax Act, 1987, mentioned the notification.