Government Explains Tax Clearance Certificate Requirement Amid Public Outcry
Following a substantial social media backlash over a Budget proposal requiring every citizen to have a tax clearance certificate to be able to travel abroad, the government stepped in yesterday to clarify the measure, saying it will not affect everybody. The requirement for such clearance would be limited only to those under investigation for financial offenses or with significant tax liabilities.
The 2024 Finance Bill of the Ministry of Finance has also proposed to include the mention of the Black Money Act, 2015, in the list of Acts which require clearing liabilities for obtaining a tax clearance certificate. “This proposed amendment does not mandate all residents to obtain this certificate,” the Ministry said.
Section 230 of the Income-tax Act, 1961, clearly mentions that every person is not required to obtain a tax clearance certificate. This requirement applies to only some people under certain circumstances necessitating such clearance. The Ministry explained that a notification issued in 2004 by the Income Tax department states that only such individuals who reside in India in certain conditions need to obtain this certificate. These conditions involve involvement in serious financial irregularities, requiring their presence in ongoing investigations under the Income-tax Act or the Wealth-tax Act, with a likelihood of tax demand being raised against them. Further, the cases of persons having direct tax arrears of more than ₹10 lakh, which have not been stayed by any authority, fall under this requirement.
The Income Tax department clarified that an assessee can be compelled to produce a tax clearance certificate only after reasons are recorded and approval is obtained from the Principal Chief Commissioner of Income or Chief Commissioner of Income. This certificate issued by the income tax authority shall ascertain that the person has no liability under the Income Tax Act, the Wealth Tax Act, 1957, the Gift Tax Act, 1958, or the Expenditure Tax Act, 1987.
