The CBDT has recently clarified the doubts regarding the requirement of an Income Tax Clearance Certificate (ITCC) for Indian immigrants. This clarification is due to the rampant rumor making rounds that indicates that one needs to acquire an ITCC before one can travel out of the country.
Income Tax Clearance Certificate commonly known as ITCC is a document issued to a business by the income tax department indicating that the business is up-to-date with its tax returns and any amount owed to the state in taxes has been fully paid.
An Income Tax Clearance Certificate (ITCC) is a certificate of compliance with tax laws and not owing any amount in tax. It also acknowledges that the individual will meet any future tax obligations when necessary.
Understanding of the requirements of the ITCC as clarified by CBDT
The CBDT issued this clarification given certain misconceptions that have arisen due to certain changes effected to section 230 of the Income-tax Act, 1961 by the Finance (No. 2) Act, 2024. In other words, there is no need for ITCC’s requirement to be mandatory in all cases. It only applies to specific individuals under certain conditions: It only applies to specific individuals under certain conditions:
Involvement in Financial Irregularities: Those, against whom serious cases of embezzlement have been made and who are necessary for the ongoing investigations under the Income Tax Act or the Wealth-Tax Act, may be required to obtain an ITCC. This is particularly so if it is expected that a large tax demand will be made against them in the future.
Outstanding Tax Arrears: Any person who has direct tax arrears of More than Rupees ten lakhs and where the demand has not been stayed by any judicial or tax authority, has to obtain the ITCC before embarking on any journey outside the country. This provision provides for addressing issues relating to huge unpaid taxes before people leave the country.
CBDT laid down the provisions whereby an ITCC could be demanded by the concerned entity after prior deliberation and under the directions of a Principal Chief Commissioner or Chief Commissioner of Income Tax.
Despite being an integrated part of the tax legislation since 2003, the changes introduced by ITCC concern the year 2024 are not revolutionary. Rather, they serve to specify in what circumstances it is permissible to have an ITCC, especially in the context of Section 5 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 to make clear that tax liabilities under this Act are equal to those under Income Tax Act.
A guide on how to apply for approval from the Kenya Revenue Authority to clear Income Tax.
To obtain an ITCC, follow these steps: To obtain an ITCC, follow these steps:
- Submit a Formal Declaration: Start with the filing of a written notice with your employer in India or with the person/organization from which you earn the income. This step forms part of a procedure that leads to the making of an ITCC request.
- NRI Requirements: The ITCC is available for NRI and In case an NRI is applying for the ITCC, he/she has to furnish an undertaking in Form 30A. This is a document filed by the employer or the income source in India that takes liability for the taxes occurring after you leave India.
- Issuance of ITCC: Having assessed your application, the tax officer shall forward you the ITCC on 30B Form. This certificate will state the date from which it is valid and also state the fact that you have paid all the taxes up to the day of issuing this certificate.
This surely will go a long way in clearing any ambiguities as to when and when not an ITCC is necessary for travel abroad as stated by the CBDT.
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