Tax Clearance Certificate: The government has clarified that tax clearance certificates are not mandatory for all individuals traveling abroad. The Ministry of Finance noted that only those involved in financial irregularities or with significant tax arrears are required to obtain such certificates. Recent media reports had sparked confusion, suggesting that all international travellers might need to secure a tax clearance certificate. However, the government has said that the requirement applies only to a select group of individuals under specific circumstances.
Who needs clearance?
Following social media outrage over a Budget proposal that seemed to mandate tax clearance certificates for all international travellers, the Centre has clarified that the proposed amendment is not universal. Only those accused of financial irregularities or having substantial tax arrears need such clearance.
In the Finance Bill, 2024, the finance ministry proposed adding the reference of the Black Money Act, 2015, to the list of Acts under which individuals must clear their liabilities to obtain a tax clearance certificate.
"The proposed amendment does not require all residents to obtain the tax clearance certificate," the ministry said in a statement. According to Section 230 of the Income-tax Act, 1961, not every person is required to obtain a tax clearance certificate. Only certain individuals, under specific circumstances, are required to obtain such a certificate.
The ministry noted that a 2004 notification from the Income Tax department specified that the tax clearance certificate may be required by individuals domiciled in India only under certain conditions. These conditions include involvement in serious financial irregularities, where the individual's presence is necessary for investigating cases under the Income-tax Act or the Wealth-tax Act, and when there is a likelihood of a tax demand being raised against them. Additionally, individuals with direct tax arrears exceeding Rs 10 lakh, which have not been stayed by any authority, may also be required to obtain the certificate.
Clarification by tax department
The tax department said that an individual can be asked to obtain a tax clearance certificate only after recording the reasons and receiving approval from the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax. The certificate, issued by the income-tax authority, must state that the individual has no liabilities under the Income-tax Act, the Wealth-tax Act, 1957, the Gift-tax Act, 1958, or the Expenditure-tax Act, 1987.