Tax Clearance Certificate: Clarification on Budget Proposal

New Delhi, Jul 28 (PTI) After social media outrage over a Budget proposal making it mandatory to get tax clearance certificates for going abroad, the government on Sunday clarified that the proposed amendment is not for all, and only those accused of financial irregularities or having substantial tax arrears need such clearance.

The finance ministry, in the Finance Bill, 2024, has proposed to add the reference of the Black Money Act, 2015, to the list of Acts, under which any person should clear his liabilities to obtain the tax clearance certificate.

"The proposed amendment does not require all the residents to obtain the tax clearance certificate," the ministry said in a statement.

As per section 230 of the Income-tax Act, 1961, every person is not required to obtain a tax clearance certificate. 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 obtain such a certificate.

The ministry said that the Income Tax department through a 2004 notification has specified that the tax clearance certificate may be required to be obtained by persons domiciled in India only in certain circumstances.

These include - 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.

The I-T department said that 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.

Such a 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, it added.