Centre clarifies on tax clearance requirements for international travel

In light of misleading reports suggesting the necessity for all individuals to obtain a mandatory tax clearance before flying abroad, the Central Government has provided clarity on the matter under Section 230 of the Income-tax Act, 1961.

The Central Board of Direct Taxes (CBDT) issued a statement emphasizing that not every individual is required to secure a tax clearance certificate. This clarification comes after Finance Minister Nirmala Sitharaman proposed an amendment to the Budget 2024-25, presented on July 23, which includes a reference to the Black Money Act, 2015, for obtaining such certificates.

The proposed amendment aims to add the Black Money Act, 2015, to the existing list of Acts—namely the Income-tax Act, the Wealth-tax Act, 1957, the Gift-tax Act, 1958, and the Expenditure-tax Act, 1987—under which liabilities must be cleared for a tax clearance certificate to be issued. This certificate, provided by the income-tax authority, would confirm that an individual has no outstanding liabilities under these Acts.

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The CBDT underscored that this requirement is not universal for all residents. Instead, it applies only to specific cases where circumstances necessitate such clearance. Individuals involved in serious financial irregularities, where their presence is crucial for ongoing investigations under the Income-tax Act or the Wealth-tax Act, and where a tax demand is likely to be raised, will be required to obtain this certificate.

Moreover, those with direct tax arrears exceeding Rs 10 lakh, which have not been stayed by any authority, will also need to secure a tax clearance certificate. The CBDT clarified that a tax clearance certificate can only be mandated after recording the reasons and obtaining approval from the Principal Chief Commissioner of Income-tax or the Chief Commissioner of Income-tax.

This clarification aims to alleviate concerns and provide a clearer understanding of the circumstances under which a tax clearance certificate is required for international travel.