July 30, 2024

Tax Clearance Certificates for Indians Moving Abroad: What You Need to Know

Do You Need a Tax Clearance Certificate to Move Abroad from India?

Starting October 1, 2024, certain individuals planning to move abroad from India will need to secure a tax clearance certificate. This significant amendment was introduced by Finance Minister Nirmala Sitharaman in the Union Budget 2024. But do all Indians moving abroad need this certificate? Let’s find out.

What is the Tax Clearance Certificate?

A tax clearance certificate is a document issued by the income-tax authority confirming that an individual has no outstanding tax liabilities under various Acts, including the Income-tax Act, the Wealth-tax Act, the Gift-tax Act, and the Expenditure-tax Act. The Finance Bill, 2024, also proposes to include the Black Money Act, 2015, in this list.

Who Needs to Obtain a Tax Clearance Certificate?

Not everyone is required to obtain a tax clearance certificate before leaving India. Only specific individuals meeting certain criteria need to secure this certificate. The criteria include:

1. Involvement in Serious Financial Irregularities

If an individual is suspected of serious financial misconduct and their presence is crucial for investigations under the Income-tax Act or the Wealth-tax Act.

If it’s likely that a tax demand will be raised against them.

2. Outstanding Direct Tax Arrears

If an individual has direct tax arrears exceeding Rs 10 lakh that have not been stayed by any authority.

What is the Process for Obtaining a Tax Clearance Certificate?

Before an individual is asked to obtain a tax clearance certificate, the reasons for this requirement must be documented. Approval must also be obtained from the Principal Chief Commissioner of Income-tax or the Chief Commissioner of Income-tax.

How is the Certificate Issued?

The certificate is issued by the income-tax authority, stating that the individual has no outstanding liabilities under the relevant Acts. The Finance Bill, 2024, ensures that the requirement for this certificate is applied only to those who fall within the defined categories.

Why is the Tax Clearance Certificate Important?

The government has mandated that a person liable to pay any taxes, or yet to clear any kind of tax dues, cannot leave the nation unless their taxes are cleared. This amendment is aimed at ensuring that individuals with substantial tax arrears or involved in financial irregularities do not evade their tax liabilities by moving abroad.

When Does This New Provision Come into Effect?

The new provision requiring certain individuals to obtain a tax clearance certificate will come into effect from October 1, 2024. It should be noted that the old provisions under the Income Tax Act remain the same for taxpayers planning to leave India.

Conclusion

If you’re planning to move abroad from India, it’s essential to be aware of the new mandate regarding tax clearance certificates. Only those with substantial tax arrears or involved in financial irregularities need to secure this certificate. Ensure your tax dues are cleared to avoid any hindrances in your travel plans.

This blog post is designed to help you understand the new requirements for tax clearance certificates and ensure you stay compliant with the latest regulations. For personalised assistance, feel free to contact us.