The Central Board of Direct Taxes (CBDT) has issued an important clarification regarding the requirement for Indian citizens to obtain an Income-Tax Clearance Certificate (ITCC) before traveling abroad. Recent reports have incorrectly suggested that all Indian citizens must secure an ITCC before leaving the country. The CBDT has emphasized that this is factually inaccurate.
Understanding Section 230(1A) of the Income Tax Act, 1961
Section 230(1A) of the Income Tax Act, 1961, was introduced by the Finance Act, 2003, to specify the circumstances under which individuals domiciled in India might be required to obtain a tax clearance certificate. The Finance (No. 2) Act, 2024, has amended this section to include liabilities under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. This ensures that liabilities under the Black Money Act are treated on par with those under the Income Tax Act for the purposes of Section 230(1A).
Correcting the Misinterpretation
The CBDT has observed that there has been a misinterpretation of this amendment, leading to erroneous reports that all Indian citizens must obtain an ITCC before departing from India. This is not the case. The requirement to obtain an ITCC is not universal and applies only under certain specific circumstances.
Who Needs to Obtain an ITCC?
An ITCC is required only in the following specific scenarios:
Involvement in Serious Financial Irregularities: If an individual is involved in serious financial irregularities, making their presence essential for investigations under the Income Tax or Wealth Tax Acts, and if it is anticipated that a tax demand will be raised against them.
Outstanding Direct Tax Arrears: If an individual has outstanding direct tax arrears exceeding Rs. 10 lakh, which have not been stayed by any tax authority.
An ITCC can only be requested after the reasons have been thoroughly documented and approval has been granted by the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax.
Conclusion
The CBDT’s clarification is vital in addressing the misinformation surrounding the ITCC requirement. The amendment does not impose a blanket obligation on all Indian citizens to obtain an ITCC before leaving the country. Instead, the requirement is restricted to specific, rare circumstances involving serious financial irregularities or substantial unpaid tax dues.
