Not every Indian leaving the country needs a tax clearance certificate, the Central Board of Direct Taxes (CBDT) said on Sunday. Post Budget, reports suggested that everyone leaving the country to settle in other countries or going out for a long period needs clearance certificates from the Income Tax Department.

In a note, the board said that only certain individuals need to obtain tax clearance certificate before leaving the country is nothing new. Existing provision says this certificate is required to be issued by the income-tax authority stating that such person 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.

Black Money Act

So, why is this issue in the news now?

“As, Black Money Act, 2015 is also administered by CBDT, vide the recently tabled Finance (No. 2) Bill, 2024, it has been proposed to add the reference of Black Money Act, 2015 in the list of Acts under which any person should clear his liabilities in order to obtain the tax clearance certificate,” the note said. Hence, the proposed amendment does not require all the residents to obtain the tax clearance certificate, it emphasised.

As per section 230 of the Income Tax Act, 1961, only in the case of certain persons, in respect of whom circumstances exist which make it necessary to obtain a tax clearance certificate will be required to do so.

A notification, dated February 5, 2024, prescribed conditions for doing so.  The first condition is where the person is involved in serious financial irregularities and their presence is necessary in 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 her.

The second condition is where the person has direct tax arrears exceeding ₹10 lakh outstanding which have not been stayed by any authority. Further, “a person can be asked to obtain a tax clearance certificate only after recording the reasons for the same and after taking approval from the Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax,” the note said.

Tax demand

Earlier, in an interview with businessline, Ravi Agrawal, Chairman, CBDT, said that the clearance for certain people is required to ensure that there is no tax liability. If one is going abroad for a short time for tourism purpose, then clearance is not required. But if the duration is longer, then clearance is required for some. “If there is a tax demand, there is a liability or there is expected liability, then you have to get this clearance,” he said.

According to him, nothing has been introduced in the Act except the obligation under Black Money Act. “This provision was there already. There is no fresh requirement as such. It has been in the statute for a long time,” he concluded.

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