TAX CLEARANCE CERTIFICATE
In an era of rapid globalization, India has witnessed significant increase in the number of deputations to fulfill the organizational demands of having the right employees with appropriate skill-sets at the right location. More and more Indians are going overseas for employment and, similarly, an increasing number of expatriates or foreign citizens are coming to India for work-related matters. As organizations grow and become more global in nature, employment issues become more complex. One of the challenges that businesses face today is compliance with multifaceted tax laws and labor regulations.
At the time of leaving India, there is an important obligation for individuals to obtain an income tax clearance certificate (ITCC).
WHAT IS AN INCOME TAX CLEARING CERTIICATE?
In common parlance, an ITCC is an income-tax clearance certificate/no-objection certificate (NOC) issued by the tax authorities certifying that a person who is leaving India has no tax dues in India or has made satisfactory arrangements in order to discharge any tax liability that may arise in the future.
WHEN AND WHO NEEDS AN INCOME TAX CLEARING CERTIICATE?
An Income Tax Clearing Certificate is required when any person is leaving the country and satisfies all the three following conditions-
- He/ She is not a resident of India.
- Has come to India in connection with business, profession or employment; and
- Has income derived from any source in India.
HOW CAN YOU GET AN ITCC?
You can get your Income Tax Clearance Certificate by any of the two ways:
- If you are getting paid by an employer, an undertaking will be provided by said employer in the prescribed format e. Form 30A
- In case of a business, you will need to collect an undertaking in the pre-defined format i.e. Form 30A from the concerned person in the business.
To the effect that tax payable by you in respect of the income earned in India shall be paid by the Indian Resident, and then go to the IT department with the undertaking.
On receipt of the same you will immediately get a no objection certificate in the form of Tax Clearance Certificate for leaving India.
WHAT HAPPENS WHEN YOU DON’T SUBMIT THE ITCC?
- It is the responsibility of the carriage owner(aircraft or ship) to check the ITCC before he/she leaves the country. If they fail to do so, they become personally liable to pay the tax due on behalf of the passenger.
- If an individual is travelling by a privately-owned aircraft or ship, the owner himself is responsible to pay the dues and get the ITCC as well. Failure in doing so will be treated as an arrear of tax on his/her part and will be recovered by the Tax Authorities of India.
WHY DO RESIDENTS OF INDIA NEED AN ITCC?
Income Tax Clearance certificate is usually not required by Indian Nationals, if you are a citizen of India travelling abroad for any other purposes other than leaving India permanently, you simply need to provide your PAN, purpose of a visit outside India and the estimated duration of your stay. But in certain situations, even Residents require a No-Objection Certificate.
- Involvement in serious financial irregularities and his/her presence is necessary for investigation of cases under the law and it is likely that a tax demand would get materialized, or
- Such a person has direct tax arrears of more than ₹ 10 lakh which have not been stayed by any authority.
Non-compliance with the aforesaid requirement of obtaining an ITCC may hamper or pose a delay in getting an Indian visa for subsequent visit(s) to India on business/profession or for employment purposes.
In light of the above consequences, it is advisable to duly comply with the applicable provisions before leaving India for good.