Income Tax Clearance Certificate (ITCC)

1. Depending on jurisdictional laws, the ITCC covers various taxes, such as sales tax, use tax, corporate tax, and unemployment tax.

1. After submitting the required documents and an undertaking, the tax officer issues the certificate in Form 30B upon satisfactory verification.

1. The ITCC specifies its validity period, ensuring compliance recognition for the holder.

Overview of ITCC

Here is the overview of Income Tax Clearance Certificate:

Requirements for Persons Domiciled in India:

1. Obligation to Obtain ITCC:
   1. Individuals domiciled in India must obtain an Income Tax Clearance Certificate (ITCC) before departing from India under certain conditions.

1. Mandatory Information at Departure:
   1. Permanent Account Number (PAN)
   2. Estimated period of stay abroad
   3. Purpose of the visit abroad

1. Condition for Departure:
   1. The individual must obtain a certificate from tax authorities confirming no liabilities under:
      1. The Income Tax Act (ITA)
      2. The Wealth-Tax Act, 1957 (WTA)
      3. The Gift-Tax Act, 1958
      4. The Expenditure-Tax Act, 1987

1. Alternatively, satisfactory arrangements for any tax payments due must also be made.

Amendment by Finance Act (No. 2) 2024:

1. The proviso to Section 230(1A) now includes liabilities under The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (Black Money Act).

Clarification by CBDT:

1. The amendment addresses concerns related to undisclosed foreign income and assets.

1. A press release from the Central Board of Direct Taxes (CBDT) clarifies this modification.

Purpose of Income Tax Clearance Certificate

The purposes of Income Tax Clearance Certificate are mentioned below:

1. Mandatory for non-residents earning income in India.

1. It confirms that all tax obligations were fulfilled during their stay.

1. Ensures any potential future tax liabilities to be covered by the employer.

1. Provides legal assurance for a smooth and worry-free departure from India.

Who Requires an Income Tax Clearance Certificate?

Individuals who require an Income Tax Clearance Certificate (ITCC) are mentioned below:

1. Individuals who are not Indian residents but are in the country for business, employment, or professional reasons.

1. Income earned from Indian sources during their stay.

1. Individuals who plan to leave the country need to prove they have no tax obligations.

1. Applies to foreign nationals involved in business activities within India who have generated income.

Non-Applicability of ITCC

The requirement for an ITCC does not apply to:

Indian residents travelling abroad:

Indian residents travelling abroad for reasons other than permanent relocation do not need to obtain an Income Tax Clearance Certificate. They need to provide the following details using Form 30C:

1. Permanent Account Number (PAN)

1. Details about the purpose and duration of their trip abroad.

Non-Resident Indians (NRIs):

Securing an Income Tax Clearance Certificate is not mandatory for NRIs who visit India for reasons not related to professional engagements or business before departing from the country.

Documents Required for ITCC

To obtain an Income Tax Clearance Certificate in India, the documents required are mentioned below:

1. PAN or Aadhaar card

1. Copies of visa and passport

1. Tax returns filed in India

1. Tax clearance certificate from your home country, if applicable

1. Other documents requested by the income tax officer

How to Secure an Income Tax Clearance Certificate in India

The following are the steps to obtain Income Tax Clearance Certificate in India:

1. Filing a Proclamation: Submit a formal declaration to your employer or income source in India as the initial step for requesting an ITCC.

1. Submitting an Undertaking (Form 30A): Non-resident Indians must provide Form 30A that ensures to take all responsibility for any tax liabilities arising after their departure by the employer or income source.

1. Approval and Issuance (Form 30B): The tax officer issues the ITCC in Form 30B, after verifying the submission which includes the certificate’s validity details. 

How to Download Tax Clearance Certificate?

ITCC applications cannot be submitted online and here the steps to download the ITCC are mentioned below:

1. Offline Application: Requires the expatriate to file Form 30A along with relevant documents.

1. Issuance Process: The tax officer will review the submission and issues the ITCC in Form 30B after satisfactory verification.

1. Certificate Validity: The ITCC specifies a validity period, clearly mentioned on the certificate.

What is Form 30C in Income Tax?

The following are the details regarding Form 30C in Income Tax:

1. General Exemption for Residents: Indian residents can only provide PAN card as they do not require an ITCC for travel abroad unless leaving the country permanently. 

1. Form 30C Requirement: Residents must file Form 30C, detailing the purpose and estimated duration of their trip.

1. Situations Requiring ITCC:

1. Involvement in financial or tax irregularities requiring their presence for investigation.

1. Outstanding tax arrears exceeding Rs.10 lakh without a stay order.

1. Approval for ITCC: Even in these cases, an ITCC can only be issued upon an order from the Chief Commissioner of the Income Tax Department. 

What is the Use of a Tax Clearance Certificate?

The following are the uses of Income Tax Clearance Certificate:

1. Tax Liability for Non-Residents: Income earned by non-residents in India during their stay must pay taxes on that income under the Income Tax Act.

1. Purpose of the ITCC: The Income Tax Clearance Certificate confirms that all tax dues for the stay of non-resident in India are cleared.

1. Future Tax Responsibility: The certificate ensures that any future tax liabilities will be addressed by the employer or income source in India.

1. Legal Clearance: The ITCC declares the legal responsibility of the non-resident for future tax issues and enables worry-free departure from India.

Consequences of Not Submitting Income Tax Clearance Certificate

The consequences of not submitting ITCC are mentioned below:

1. Tax Clearance Requirement for Non-Residents: Non-residents must clear any outstanding tax dues before leaving India.

1. Failure to Submit ITCC:

1. If departing via aircraft or ship, the carrier must verify the necessary documents and makes them liable for the tax due of the non-resident on failing to verify the documents.

1. If leaving via private transport, the individual must clear their dues and obtain ITCC before departure and the Tax Authority will take recovery actions for failing to clear the dues.