Tax clearance certificate not a must for all travelling abroad

The Union government has clarified that tax clearance certificates would only be mandatory for those accused of financial irregularities or those who have substantial unpaid tax arrears. The clarification came when a Budget 2024 proposal that made the certificate mandatory for all overseas travellers sparked outrage on social media.

The Budget had 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 has now clarified that the proposed amendment does not apply to all. “The proposed amendment does not require all the residents to obtain the tax clearance certificate,” said the ministry.

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.

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

Who needs to get a 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.

Outstanding drect tax arrears: If a person has direct tax arrears exceeding ₹10 lakh that have not been stayed by any authority.

A person can be asked to obtain a tax clearance certificate, only after the reasons for the same have been recorded, the department says. Permission 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 person concerned 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, the notification stated. .

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