The Union government has clarified that tax clearance certificates are not mandatory for all individuals traveling abroad. The Ministry of Finance emphasised that only those involved in financial irregularities or with significant tax arrears are required to obtain such certificates.

Recent reports had sparked confusion, suggesting that all international travelers might need to secure a tax clearance certificate.

However, the government has stated that the requirement applies only to a select group of individuals under specific circumstances.

Clarification on Section 230 of the Income Tax Act, 1961

According to Section 230 of the Income Tax Act, 1961, tax clearance certificates are not universally required.

Instead, they are necessary only for individuals who meet certain criteria:

Serious financial irregularities: Individuals involved in serious financial irregularities, whose presence is crucial for investigations under the Income Tax Act or the Wealth Tax Act, may need a certificate.

This applies when there is a likelihood of tax demands being raised against them.

Significant tax arrears: Persons with direct tax arrears exceeding ₹10 lakh, which have not been stayed by any authority, are also required to obtain a tax clearance certificate.

A tax clearance certificate can only be requested after documenting the reasons and securing approval from the Principal Chief Commissioner of Income Tax or the Chief Commissioner of Income Tax.

The certificate, issued by the income tax authority, confirms that the individual has no liabilities under the Income Tax Act, the Wealth Tax Act, the Gift Tax Act, or the Expenditure Tax Act.

Proposed amendment in Finance Bill 2024

In the Finance Bill 2024, the Ministry of Finance has proposed adding the Black Money Act, 2015, to the list of acts requiring tax clearance certificates.

This inclusion ensures that individuals must clear their liabilities under the Black Money Act to obtain a certificate.

The government has assured the public that this amendment does not impose a blanket requirement for all residents to obtain tax clearance certificates.

The amendment targets specific cases where financial irregularities or tax arrears are present, not the general public.

This clarification aims to address any misunderstandings and reassure international travelers that tax clearance certificates are not a routine requirement for travel.