Section 230(1A) No Need For a Tax Clearance Certificate for Most Traveling Abroad: CBDT

Section 230(1A) of the Income-tax Act, 1961, requires certain individuals domiciled in India to obtain a tax clearance certificate under specific circumstances. Effective June 1, 2003, this provision was amended by the Finance (No.2) Act, 2024 to include liabilities under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, aligning it with other direct tax laws for Tax Filing Online.

There is some confusion regarding this amendment, with incorrect reports suggesting that all Indian citizens must obtain a tax clearance certificate before leaving the country. This is not true.

According to Section 230, only individuals facing specific situations need a tax clearance certificate. These include:

1. Individuals involved in serious financial irregularities or under investigation, where their presence is required and a tax demand might be raised.
2. Any authority does not stay individuals with direct tax arrears exceeding Rs. 10 lakh.

The CBDT’s Instruction No. 1/2004 clarifies that a tax clearance certificate is only needed in these rare cases and must be approved by the Principal Chief Commissioner or Chief Commissioner of Income Tax Filing Online. Thus, the requirement for a tax clearance certificate remains limited to these exceptional circumstances.