Tax Clearance Certificate for travelling abroad:

Amendment in the budget and further clarification:

1. Clarification by Government:

The government clarified that not all residents need to obtain a tax clearance certificate for traveling abroad.
This requirement applies only to individuals accused of financial irregularities or those with significant tax arrears.

2. Union Budget Proposal:

The Union Budget proposal initially suggested mandatory tax clearance certificates for all residents going abroad, causing public concern. However, this requirement is limited to specific cases, particularly under the Black Money Act, 2015, as mentioned in the Finance Bill.

So cases under the Black Money Act would now get covered by the requirement to obtain a tax clearance certificate.

3. Existing Provisions:

Section 230 of the Income Tax Act, 1961, does not require all individuals to obtain a tax clearance certificate.
According to the CBDT’s Instruction No. 1/2004, dated February 5, 2004, a tax clearance certificate is necessary only for individuals involved in serious financial irregularities or those with significant direct tax arrears exceeding Rs. 10 lakh, provided these arrears have not been stayed by any authority. It specifies that the certificate is necessary only in cases of:

·       Serious financial irregularities

·       Investigations under the Income Tax or Wealth Tax Act that require the individual’s presence and may result in a tax demand.

·       Direct-tax arrears exceeding ₹10 lakh, provided these arrears have not been stayed.