Clarification Issued For Income-Tax Clearance Certificate Being Not Mandatory For All Resident Individuals Clarification Issued For Income-Tax Clearance Certificate Being Not Mandatory For All Resident Individuals

The CBDT has clarified the provisions of section 230(1A) of the IT Act as under:

• Section 230(1A) of the IT Act is applicable to persons domiciled in India and was introduced in the legislation with effect from June 01, 2003, vide Finance Act, 2003.
• As per section 230(1A) of the IT Act, a person domiciled in India shall obtain ITCC before leaving India if, in the opinion of the income tax authorities, they fall under the purview of specified circumstances. The ITCC shall be obtained to confirm that no outstanding tax liabilities are payable under specified Acts. If any outstanding tax liabilities are payable under these Acts, sufficient funds shall be made available to pay the tax liabilities that are currently due or anticipated to become due from persons leaving India.
• Prior to amendment in FA 2024, these specified Acts included liabilities payable under the IT Act, the Wealth-tax Act, 1957, the Gift-tax Act, 1958, and the Expenditure-tax Act, 1987. The FA 2024 has amended section 230(1A) of the Act to include liabilities payable under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 (BMA).
• The following specified circumstances, as outlined in CBDT Instruction No. 1/2004, dated December 5, 2004, mandate that persons domiciled in India must obtain an ITCC:

1. 1. The person is involved in serious financial irregularities whereby the presence of such person is necessary to investigate cases under the specified Acts, a potential tax demand may arise against such person, or
   2. The person is liable to pay direct tax arrears exceeding INR 10 Lakhs, and no authorities have stayed such tax demand.

• Additionally, the income tax authorities are not permitted to require every person domiciled in India to obtain an ITCC without recording the reasons in writing and obtaining prior approval of the Principal Chief Commissioner or Chief Commissioner of Income tax.

In the light of the above provisions, the CBDT has stated that the provisions of section 230(1A) of the IT Act remain unchanged despite the amendments made by the FA 2024. Additionally, the CBDT has clarified that the requirement for all resident individuals to obtain an ITCC before leaving India is factually incorrect and applies only under specific circumstances.

KNAV Comments:

1. The announcement has clarified that obtaining an Income Tax Clearance Certificate (ITCC) is not mandatory for all resident individuals before departing from India.
2. This clarification is intended to alleviate uncertainty among taxpayers regarding the necessity of obtaining an ITCC before leaving the country.
3. Additionally, it seeks to explain that the Finance Act 2024 has broadened the scope of Section 230(1A) of the Income Tax Act to encompass tax liabilities under the Black Money Act.
4. The Finance Act 2024 has not introduced any major changes to the provisions regarding the Income Tax Clearance Certificate (ITCC). The sole adjustment is the addition of assessment under the Black Money Act. As a result, most individual residents will not be impacted and will not need to secure an ITCC before departing from India.