In light of the finance bill tabled during the recent 2024 budget session, news has surfaced that the bill requires every citizen domiciled in India to submit an income tax clearance certificate before leaving the country (here & here). This rule is set to take effect on 01 October 2024. In this article, we fact-check the claim made in the post.
Claim: The Finance Bill of 2024 proposes that every citizen domiciled in India must submit an income tax clearance certificate before leaving the country.
Fact: The Finance Bill proposes an income tax clearance certificate for those leaving the country. However, the Finance Ministry clarified that it is only mandatory for individuals accused of financial irregularities or with substantial tax arrears. Hence, the claim made in the post is MISLEADING.
The Finance Bill, 2024 has mentioned that any person domiciled in India would require an income tax clearance certificate to leave the country. Clause 71 of the Bill seeks to amend section 230 of the Income-tax Act relating to tax clearance certificates. This amendment will take effect from 01 October 2024.
The Bill further proposes to amend the proviso of the mentioned sub-section by including a reference to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, to impose liabilities under this Act for obtaining the certificate indicating no liabilities.
However, in response to the controversy triggered by the proposal, the Finance Ministry clarified that the proposed amendment does not apply to all residents of India. It stated that only those accused of financial irregularities or with substantial tax arrears will need to obtain such clearance.
“As per Section 230 of the Income-tax Act, 1961, not every person is required to obtain a tax clearance certificate. Only certain individuals, under specific circumstances that necessitate obtaining a tax clearance certificate, will be required to do so,” the ministry stated.
Additionally, on 20 August 2024, the CBDT issued a clarification stating that only specific individuals, for whom certain circumstances necessitate obtaining a tax clearance certificate, are required to obtain it.
In this context, CBDT has mentioned that based on its instruction No. 1/2004, dated 05 February 2004, the tax clearance certificate under Section 230(1A) of the Act, may be required to be obtained by persons domiciled in India only in the following circumstances:
- where the person is involved in serious financial irregularities and his presence is necessary in the investigation of cases under the Income-tax Act or the Wealth-tax Act and a tax demand will likely be raised against him, or
- where the person has direct tax arrears exceeding Rs. 10 lakhs outstanding against him which have not been stayed by any authority.
To sum up, the Finance Ministry clarified that an income tax clearance certificate is not mandatory for every citizen leaving the country.
