A viral WhatsApp forward claiming that all Indian citizens must obtain an Income Tax Clearance Certificate (ITCC) before travelling abroad starting October 1, 2024, is misleading.
BOOM found that the Central Board of Direct Taxes (CBDT) clarified that under Section 230 of the Income-Tax Act, 1961, not everyone is required to obtain an Income Tax Clearance Certificate (ITCC). Only individuals involved in serious financial irregularities or those with direct tax arrears exceeding Rs. 10 lakh are required to obtain an ITCC, and this is only after the Income Tax officials specifically demand it.
The forward states that the certificate is required to prove that travellers have no outstanding tax liabilities. The process involves applying online through the Income Tax Department's portal, submitting documents like a PAN card and tax returns, and paying a nominal fee. The message also warns that not having an ITCC could lead to fines and travel restrictions.
The misleading forward claims that "All Indian citizens, regardless of the purpose of travel (business, tourism, education, etc.), must obtain an ITCC before departure. The requirement applies to both first-time travellers and frequent flyers." This statement is misleading, as there is no official mandate requiring a Tax Clearance Certificate (ITCC) for all overseas travellers.
It concludes by saying that the new rule is meant to improve tax compliance and make the system more transparent. It also advises travellers to get familiar with the process to avoid any travel issues.
The claim emerged following an amendment to the Income Tax Act, 1961, introduced through the Finance Bill 2024, where the Black Money Act was incorporated into the Income Tax Act.
Fact-check
Who Needs the Tax Clearance Certificate?
1. Those involved in serious financial irregularities.
2. Those with direct tax arrears exceeding Rs. 10 lakh.
On August 20, 2024, the Union government clarified that the viral claim about mandatory ITCC for all Indian citizens travelling abroad is "factually incorrect."
The CBDT issued a statement explaining that under Section 230 of the Income-Tax Act, 1961, not everyone is required to obtain an ITCC.
An ITCC is necessary only in exceptional cases, such as:
Serious Financial Irregularities: When a person is involved in significant financial irregularities, and their presence is essential for an investigation under the Income-tax Act or the Wealth-tax Act, with a likely tax demand to be raised against them.
Outstanding Tax Arrears: When a person has direct tax arrears exceeding Rs. 10 lakh that have not been stayed by any authority.
Additionally, a person can be asked to obtain a tax clearance certificate only after recording the reasons for the same and after taking approval from the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax.
Speaking to business news podcast The Core Report, Dinesh Kanabar, an international tax expert and founder and CEO of Dhruva Advisors, a tax and regulatory firm in India explained that if either of the two situations—financial irregularities or substantial tax arrears—arise, the assessing officer, with the commissioner's approval, must issue a notice preventing the individual from leaving the country without obtaining an income tax clearance certificate. This was the law before 2024.
While the law still exists, The Finance Act 2024 introduced a change by incorporating the Prevention of Money Laundering Act (PMLA).
Now, if these conditions (financial irregularities or substantial tax arrears) also apply under the PMLA, the individual must obtain a clearance certificate, and the income tax office will notify immigration authorities accordingly. However, Kanabar confirmed that this requirement only arises when the Income Tax office issues a specific notice under these conditions.
