By Tejas

Pune, August 21: The Central Board of Direct Taxes (CBDT) has clarified that only specific individuals domiciled in India, particularly those involved in "serious financial irregularities" or with outstanding tax demands exceeding Rs 10 lakh, are required to obtain an income-tax clearance certificate (ITCC) before travelling abroad. This clarification comes in response to widespread misinformation suggesting that all Indian citizens must obtain an ITCC prior to leaving the country.

In an official release on August 20, the CBDT emphasised that these reports are based on a misinterpretation of the recent amendment to the Income Tax Act, 1961. The erroneous claims have created unnecessary confusion among the public, but the board has assured that the ITCC requirement is not applicable to all citizens.

Section 230(1A) of the Income Tax Act, which mandates obtaining a tax-clearance certificate in certain cases, was initially introduced through the Finance Act of 2003. The recent amendment, brought by the Finance Act of 2024, only modifies Section 230(1A) by including a reference to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

According to the CBDT’s clarification, the ITCC is necessary in only two specific situations:

1. When an individual is involved in serious financial irregularities and their presence is essential for investigations under the Income Tax Act or the Wealth Tax Act, with a likely tax demand to be raised against them. Or

2. When a person has direct tax arrears exceeding Rs 10 lakh that have not been stayed by any authority.

Moreover, a person can be asked to obtain a tax clearance certificate only after the reasons have been documented and approval has been secured from the Principal Chief Commissioner or Chief Commissioner of Income Tax.