Income Tax Clearance Certificate (ITCC) not for everyone

  

 

Since 2004 there is a provision in the Income-tax Act, 1961 which provides for obtaining an income tax clearance certificate (ITCC) under Section 230 of Income-tax Act, 1961 (‘IT Act’). It prescribes that a person domiciled in India who plans to leave India shall at the time of departure declare in prescribed form and manner (Form 30C) following details to the prescribed income tax authority:

·       PAN

·       Purpose of visit outside India

·       Estimated period of stay outside India

Such declaration is sufficient in most cases. Further, there is no exception carved out qua such declaration. Practically, how many individual taxpayers declare is also a question as not every passport holder resident in India may make such declaration prior to his travel abroad. It is also not clear whether the visa application procedures require such declaration indirectly to be made by or on behalf of Indian resident passport holder planning to travel abroad.

Moreover, in specific cases, aside of such declaration, income-tax authority may also direct such person to obtain an income tax clearance certificate (ITCC) in prescribed form and

manner². Such circumstances may rise when such person:

·       is involved in serious financial irregularities and his presence is necessary in

investigation of cases against him under relevant law and it is likely that a tax demand would be raised against him, or

·       has outstanding direct tax arrears exceeding Rs 10 lakhs against him which are not stayed

Such ITCC, issued finally in Form 33 by prescribed income-tax authority,

·       shall state that such person has no liabilities under either of

o   IT Act

o   Wealth-tax Act, 1957

o   Gift-tax Act, 1958

o   Expenditure-tax Act, 1987

o   Union Budget 2024 has now added w.e.f Oct 1, 2024 - Black Money

(Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (in short ‘Black Money Law’)

·       or that satisfactory arrangements have been made for the payment of all or any of above taxes which are payable by such person

 

Conclusion

The law mandating (a) across the board upfront declaration by individuals planning to travel abroad and (b) obtaining ITCC in specific cases is prevalent for last 20 years. The recent amendment vide Finance Bill 2024 merely included Black Money Law³, as one of the additional laws to be looked into for providing ITCC. This amendment triggered, much to the ignorance of general population, confusion in some quarters as to whether such ITCC needs to be procured qua each foreign travel by resident Indian passport holders.

As explained earlier, there are two parts to this provision – (a) self-declaration prior to travel and (b) obtaining ITCC in specific cases. Uniform self-declaration prior to foreign travel in Form 30C is mandatory since 2004. An individual who is travelling abroad for reasons other than permanent relocation needs to inform the tax authorities of their travel plans in Form 30C by submitting the PAN card. However, this is more like a general compliance requirement on the individuals, which does not involve any kind of penalty if not complied by them. On the other hand, the ITCC requirement is imposed in specific cases as mentioned above. The addition of Black Money Law by Union Budget 2024 does not alter this position.