Tax Clearance Certificate for Foreign Travel: Confusion & Clarification
There is fake news which is highly circulating in the social media that the person would be required to obtain a Tax Clearance Certificate (TCC) from October 1st, 2024. It appears that the entire tourism industry is misguided on various fronts on GST & Income Tax including on the present aspect of TCC. We will discuss more such issues in days to come.
The present circulation on TCC (which is not fully correct) can be summarized as under:
1. Who Needs the Tax Clearance Certificate?
All Indian citizens, regardless of the purpose of travel (business, tourism, education, etc.), must obtain a TCC before departure. The requirement applies to both first-time travelers and frequent flyers.
2. The Government of India has introduced new regulations requiring all Indian citizens to obtain a Tax Clearance Certificate (TCC) before leaving the country & the measure aims to ensure compliance with tax obligations and prevent tax evasion.
3. All Indian citizens, regardless of the purpose of travel (business, tourism, education, etc.), must obtain a TCC before departure.
4. The requirement applies to both first-time travelers and frequent flyers.
5. The TCC serves as proof that the traveler has no outstanding tax liabilities. It ensures that all dues and returns have been filed and cleared with the Income Tax Department.
6. The circulation also elaborates about the procedure of obtaining the TCC over Income Tax Department’s in online mode along with documents required for its uploading. It also mentioned that there may be a nominal fee for processing the TCC application.
7. The circulation further mentions that obtaining a Tax Clearance Certificate is a mandatory step for Indian citizens travelling abroad under the new regulations.
Authenticity of Circulation:
1. The content circulated above is not totally correct and factual as such. In fact, the Ministry of Finance has brought the press release that the tax department will not unnecessarily harass all the resident taxpayers who are traveling abroad.
2. One may note that there is already a provision in the Income Tax Act – 1961 regarding income tax clearance certificate (often referred as ITCC). It was very much in use earlier where even every contractor was required to submit the ITCC at the time of applying for every tender/Government Contract or at the time of selling the immoveable properties. After the requirements of obtaining ITCC were done away, the section was almost in sleeping mode. Now, it is in the limelight in view of a minor amendment (tax demand under Black Money Act) in the Finance (No.2) Act, 2024. One must note that there is nothing new as it was already there in the statute book.
3. With regard to the Point No. 1 of circulation regarding who needs the TRC it is mentioned that “All Indian citizens, regardless of the purpose of travel (business, tourism, education, etc.), must obtain a TCC before departure. The requirement applies to both first-time travelers and frequent flyers” is totally incorrect & wrong information.
TRC is required by only in certain circumstances n for only few domiciled in India involved in serious financial irregularities. For those having tax demand of more than Rs 10 lakh or whose presence is required by the department in serious Income Tax Investigation by the department.
4. It may be noted that section 230 of the Income Tax Act – 1961 categorically mentioned as under:
“Provided that no income-tax authority shall make it necessary for any person who is domiciled in India to obtain a certificate under this section unless he records the reasons therefor and obtains the prior approval of the Principal Chief Commissioner or Chief Commissioner of Income-tax”.
5. The question arises as to how the travel agent and visa giving authority will come to know that direct tax demand on such a person is more than 10 lakhs and that person is involved in serious financial irregularities?
There is no clear cut answer as of now with me. It might happen that the income tax department may issue a look out notice to those people having demand more than 10 lakhs or Government may provide a dashboard to verify demand status and financial irregularities based on PAN to the concerned entities as it is provided earlier for the purpose of section 194N, 206AB and 206CCA compliance dashboard options on income tax sites or Government notifies the immigration authorities
Let us read section 230 of the Income Tax Act – 1961 which provides for a Tax Clearance Certificate. It reads as under:
Tax clearance certificate:
- (1) Subject to such exceptions as the Central Government may, by notification in the Official Gazette, specify in this behalf, no person,—
(a) who is not domiciled in India;
(b) who has come to India in connection with business, profession or employment; and
(c) who has income derived from any source in India,
shall leave the territory of India by land, sea or air unless he furnishes to such authority9 as may be prescribed—
(i) an undertaking in the prescribed form10 from his employer; or
(ii) through whom such person is in receipt of the income,
to the effect that tax payable by such person who is not domiciled in India shall be paid by the employer referred to in clause (i) or the person referred to in clause (ii), and the prescribed authority10a shall, on receipt of the undertaking, immediately give to such person a no objection certificate11, for leaving India:
Provided that nothing contained in sub-section (1) shall apply to a person who is not domiciled in India but visits India as a foreign tourist or for any other purpose not connected with business, profession or employment.
(1A) Subject to such exceptions as the Central Government may, by notification in the Official Gazette, specify in this behalf, every person, who is domiciled in India at the time of his departure from India, shall furnish, in the prescribed form12 to the income-tax authority or such other authority as may be prescribed13—
(a) the permanent account number allotted to him under section 139A:
Provided that in case no such permanent account number has been allotted to him, or his total income is not chargeable to income-tax or he is not required to obtain a permanent account number under this Act, such person shall furnish a certificate in the prescribed form;
(b) the purpose of his visit outside India;
(c) the estimated period of his stay outside India:
14Provided that no person—
(i) who is domiciled in India at the time of his departure; and
(ii) in respect of whom circumstances exist which, in the opinion of an income-tax authority render it necessary for such person to obtain a certificate under this section,
shall leave the territory of India by land, sea or air unless he obtains a certificate from the income-tax authority stating that he has no liabilities under this Act, or the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the Expenditure-tax Act, 1987 (35 of 1987), or that satisfactory arrangements have been made for the payment of all or any of such taxes which are or may become payable by that person:
Provided that no income-tax authority shall make it necessary for any person who is domiciled in India to obtain a certificate under this section unless he records the reasons therefor and obtains the prior approval of the Principal Chief Commissioner or Chief Commissioner of Income-tax.
(2) If the owner or charterer of any ship or aircraft carrying persons from any place in the territory of India to any place outside India allows any person to whom sub-section (1) or the first proviso to sub-section (1A) applies to travel by such ship or aircraft without first satisfying himself that such person is in possession of a certificate as required by that sub-section, he shall be personally liable to pay the whole or any part of the amount of tax, if any, payable by such person as the Assessing Officer may, having regard to the circumstances of the case, determine.
(3) In respect of any sum payable by the owner or charterer of any ship or aircraft under sub-section (2), the owner or charterer, as the case may be, shall be deemed to be an assessee in default for such sum, and such sum shall be recoverable from him in the manner provided in this Chapter as if it were an arrear of tax.
15 (4) The Board may make rules for regulating any matter necessary for, or incidental to, the purpose of carrying out the provisions of this section.
Explanation.—For the purposes of this section, the expressions “owner” and “charterer” include any representative, agent or employee empowered by the owner or charterer to allow persons to travel by ship or aircraft.
Conclusion:
1. TCC will be required only if a person domiciled in India involved in serious financial irregularities or has tax demand of more than Rs 10 lakh or whose presence is required by the department in serious Income Tax Investigation by the department.
2. There is responsibility on the owner or charterer of any ship or aircraft carrying persons from any place in the territory of India to any place outside India to ensure that above law is not violated.
