The Central Board of Direct Taxes ( CBDT ) issued a clarification on Monday, debunking the widespread misconception that all Indian citizens must obtain an Income-Tax Clearance Certificate ( ITCC ) before leaving the country. The Ministry of Finance stated that this interpretation is incorrect and stems from a misunderstanding of recent amendments to the Income-Tax Act.
The confusion arose following the Finance (No. 2) Act, 2024, which amended Section 230(1A) of the Income-Tax Act, 1961. The amendment introduced a reference to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, into the section.
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The purpose of this inclusion was to ensure that liabilities under the Black Money Act are treated similarly to those under the Income-Tax Act and other direct tax laws for the purpose of obtaining a tax clearance certificate.
However, this amendment has led to erroneous reports suggesting that all Indian citizens are now required to obtain an ITCC before travelling abroad. The Ministry of Finance has categorically denied this, stating that the requirement for an ITCC has not been universally imposed.
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According to Section 230 of the Income-Tax Act, only specific individuals are required to obtain an ITCC, and this requirement has been in place since the Finance Act of 2003. The CBDT reiterated that the amendment in 2024 does not alter this provision.
The ITCC is only mandated in rare circumstances, such as when an individual is involved in serious financial irregularities or has direct tax arrears exceeding ₹10 lakh, which have not been stayed by any authority.
The CBDT further clarified that the ITCC requirement applies only to those who are domiciled in India and who meet the specific conditions outlined in Instruction No. 1/2004, issued on February 5, 2004. Additionally, a tax clearance certificate can only be requested after proper documentation and approval from the Principal Chief Commissioner of Income-Tax or Chief Commissioner of Income-Tax.
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The Ministry of Finance’s statement aims to dispel the misinformation and reassure the public that the ITCC is only necessary in exceptional cases, not as a blanket requirement for all citizens travelling abroad.
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