Finance Minister Nirmala Sitharaman has proposed a new rule in the Union Budget 2024 for those citizens who are planning to move out of India. This amendment requires individuals living in India to settle all their tax dues and get a ‘clearance certificate’ before leaving the country, as per a new provision of the Black Money Act.
From October 1, 2024, Indian citizens will need to obtain a clearance certificate verifying their compliance with the Black Money Act before leaving the country.
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According to section 230 of the Income-tax Act, anyone living in India must get a clearance certificate from tax authorities before departing. This certificate ensures that the individual has no unpaid taxes or has made arrangements to settle any outstanding amounts.
This requirement covers taxes under the Income-tax Act as well as the old Wealth Tax, Gift Tax, and Expenditure Tax Acts.
What is a Clearance Certificate?
A clearance certificate is an official document issued by an authorized authority, confirming that a person or organization has met specific requirements or obligations. There are various types of certificates depending on the context, such as a Tax Clearance Certificate and a Police Clearance Certificate.
A Police Clearance Certificate is issued by the Police Department, which confirms that a person has no criminal cases registered against them or pending. This certificate is often needed for traveling abroad, applying for a job, or adopting a child.
A Clearance certificate is also required for various purposes, such as applying for a loan or bidding on government contracts.
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Remember, Indian residents must also disclose all foreign assets (including investments like shares and securities) and any income from these assets when filing their Income Tax Returns.
Failure to report foreign income and assets, or to submit the related ITR, could result in a Rs 10 lakh penalty under sections 42 or 43 of the Black Money Act, regardless of the asset’s value. However, these sections do not apply to one or more bank accounts with a total balance not exceeding Rs 5 lakh at any time during the previous year.
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