Planning to move abroad? Finance Minister Nirmala Sitharaman announced in Union Budget 2024 that individuals residing in India must now clear all their tax dues and obtain a ‘Tax Clearance Certificate’ before leaving the country.
However, there is no need to panic because the Union government clarified on Sunday (28 July, 2024) that tax clearance certificates will only be required for those individuals who are involved in financial misconduct or those with significant unpaid taxes. Let’s understand this in detail.
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Who Needs a Tax Clearance Certificate?
The Finance Ministry, in the Finance Bill 2024, has proposed including the Black Money Act, 2015, in the list of laws under which individuals must clear their liabilities to obtain a tax clearance certificate.
Under Section 230 of the Income-tax Act, anyone leaving India must first get a clearance certificate from tax authorities. This certificate confirms that the person has no unpaid taxes or has arranged to settle any outstanding amounts.
This rule applies not just to income tax, but also to old taxes like Wealth Tax, Gift Tax, and Expenditure Tax.
Whereas, the government has also clarified that the proposed amendment only applies to some people with specific conditions, and not every individual requires a tax clearance certificate.
Specific Conditions Include:
Serious Financial Irregularities: If you are suspected of serious financial misconduct and your presence is essential for investigations under the Income-tax Act or the Wealth-tax Act, you will need a tax clearance certificate.
Also Read: New Tax Regime vs Old Regime in 2024: Here’s How to Know Which is Better For You Now
Outstanding Direct Tax Arrears: If you have direct tax dues exceeding Rs 10 lakh that are not stayed by any authority, you must obtain this certificate.
Keep in mind that if it is asked to obtain a tax clearance certificate, the reasons must be documented, and approval must be obtained from the Principal Chief Commissioner of Income-tax or the Chief Commissioner of Income-tax.
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