Income Tax Clearance Certificate Not Mandatory for All International Travelers; Centre Explains Social Media Outrage

The Union government on Sunday clarified that tax clearance certificates will be mandatory only for those accused of financial irregularities or having significant tax arrears. The clarification comes after a budget proposal for 2024 that would make them mandatory for all international travellers sparked outrage on social media.

In the Finance Bill 2024, the Ministry of Finance has proposed to add a reference to the Black Money Act, 2015 to the list of statutes. This Act requires everyone to settle their financial obligations and obtain a tax clearance certificate.

The government has clarified that the proposed amendment does not apply to everyone. “The proposed amendment does not require all residents to obtain a tax clearance certificate,” the ministry said, PTI reported.

What does Section 230 of the Income Tax Act of 1961 say?

Section 230 of the Income Tax Act, 1961 does not mandate every person to obtain a tax clearance certificate. “Only in the case of certain persons in respect of whom there are circumstances which require the requirement of obtaining a certificate, a tax clearance certificate will be required to be obtained, PTI reported.

The ministry said a notification issued by the Income Tax Department in 2004 stated that a tax clearance certificate was required only from residents of India and “only in certain circumstances”.

Who needs a tax clearance certificate?

Involvement in serious financial irregularities: If a person is suspected of having committed serious financial irregularities and his presence is crucial to investigations under the Income Tax Act or the Wealth Tax Act and there is a likelihood of a tax claim being made against him, he must obtain a tax clearance certificate.

Outstanding Direct Tax Arrears: If a person has outstanding direct taxes in excess of ₹In case of 10 lakh which has not been detained by any authority, it is necessary to obtain a tax clearance certificate.

A person can be asked to obtain a tax clearance certificate only after recording the reasons for doing so, the income tax department said. The consent of the Principal Chief Commissioner of Income Tax or the Chief Commissioner of Income Tax is also required.

The tax authority issuing the certificate must declare that the person has no liability under the Income Tax Act, Wealth Tax Act, 1957, Gift Tax Act, 1958 or Expenditure Tax Act, 1987 as specified in the notification.