Do You Need an Income Tax Clearance Certificate When Travelling Abroad?

The ITCC is issued by the Income Tax authorities stating that you have cleared all your tax dues before leaving the country. It is an important regulatory requirement (under Section 230 (1A) of the Income-tax Act, 1961).

However, there exists a delusion that everyone needs to get the ITCC. That's not true.

In fact, owing to this misbelief and incorrect information floating around on social media, the Central Board of Direct Taxes (CBDT) issued a clarification in respect of the Income Tax Clearance Certificate (ITCC).

It is being erroneously reported that all Indian citizens must obtain before leaving the country -- a position that is factually incorrect said the CBDT in a press release.

As per Section 230 of the Income-tax Act, every person is not required to obtain a tax clearance certificate. Only certain persons, in respect of whom circumstances exist which make it necessary to obtain a tax clearance certificate, are required to obtain the said certificate.

So, Who Is Supposed to Obtain an Income Tax Clearance Certificate?

The ITCC needs to be obtained in two cases:

1. A person not domiciled in India. He/she is visiting India for any purpose of business or vocation and has generated income from an Indian income source.

2. A person domiciled in India who has liabilities under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (called 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.

In other words, for the persons domiciled in India, the ITCC will be required only in the following circumstances:

• Where the person is involved in serious financial irregularities and his presence is necessary in the investigation of cases under the Income-tax Act or the Wealth-tax Act and it is likely that a tax demand will be raised against him, or

• Where the person has direct tax arrears exceeding Rs 10 lakh outstanding against him which have not been stayed by any authority.

Moreover, the ITCC may be asked to be obtained only after recording the reasons for the same and after obtaining approval from the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax.

Therefore, only in rare cases for persons domiciled in India, the ITCC is required from the Income Tax authorities when travelling abroad.

How to Obtain the Income Tax Clearance Certificate?

At present it's not possible to obtain the Income Tax Clearance Certificate online through the Income Tax portal.

As mentioned earlier, the ITCC may be obtained after recording the reasons for the same and obtaining approval from the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax.

For the ITCC, an application needs to be made in Form 30A along with the necessary documents.

Forms 30C and 31 are for furnishing additional details under Section 230(1A) of the Income-tax Act, 1961. These two forms are necessary for a person domiciled in India travelling abroad without any intention of permanently leaving the country.

What are the Documents That Are Needed to Obtain an Income Tax Clearance Certificate?

The documents generally required are:

• - Passport

• - Visa copies

• - PAN card copy

• - Aadhaar card copy

• - Copies of the Income Tax Returns filed

Besides, some other documents may be also asked for by the Income Tax authorities.

If the tax authorities are satisfied with all the information provided in the application form and the requisite documents are fine, a no objection certificate would be issued in Form 30B to a person not domiciled in India. A final clearance certificate under Section 230(1A) of the Income-tax Act, 1961 will be issued in Form 33.

Overall, obtaining the Income Tax Clearance Certificate can be a time-consuming process. It's better to have a copy of the certificate when travelling abroad if you are meeting the criteria as explained above.

What If the Income Tax Clearance Certificate Is Not Obtained?

Not obtaining an Income Tax Clearance Certificate could subject you to embarrassment and worry. Note, that the aircraft or ship taking you out of the country is required to check all the necessary documents before it takes off. If you, the passenger are found to have outstanding taxes, the carriage owner may be held responsible. The carrier usually takes care that the onus of paying your dues does not fall on them. They comply with all relevant tax regulations to avoid potential legal and financial consequences.

The tax authorities would take over and ensure all the necessary measures to recover the tax dues.

Hence to save you from embarrassment and in the interests of your reputation plus well-being, ensure that you pay all legitimate tax dues on time and are not involved in any serious financial irregularities that can cost you dear.

Be thoughtful in your approach and make your foreign trip stress-free and safe.

Happy Planning!

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