Everything to Know About Income Tax Clearance Certificate

Who Requires an Income Tax Clearance Certificate, and When Is It Required

According to the Indian Income Tax Laws, anyone who is not an Indian citizen is present in the country on business, employment, or other official business and derives any income from India must acquire an Income Tax Clearance Certificate before departing the country or returning home.

In essence, this means that foreign nationals in India on business and who also receive income from India should apply for an Income Tax Clearance Certificate in India before leaving for their home country.

If a person meets all 3 of the following criteria and is departing the country, they must obtain an Income Tax Clearance Certificate-

a) They are not a resident of India

b) Has traveled to India for work, business, or other purposes

c) Receives income from anywhere in India

Additionally, even though the majority of Indian citizens and residents do not require to have an Income Tax Clearance Certificate, a person may be ordered to obtain an Income Tax Clearance Certificate if they are suspected of engaging in serious financial irregularities, their presence is required for legal investigation, and a tax demand may become real.

Who Does Not Require an Income Tax Clearance Certificate

While a resident Indian who travels abroad for any reason other than to leave India permanently is required to provide his PAN, he is not required to obtain an Income Tax Clearance Certificate.

Form 30C must be used to submit this information. Further, an Income Tax Clearance Certificate is not necessary for an Indian non-resident who entered the country for any reason other than business, profession, or employment to obtain before leaving the nation.

How To Obtain an Income Tax Clearance Certificate?

Individuals can file a proclamation with their employer in India or with the person from whom they receive their income if they want to acquire an Income Tax Clearance Certificate. 

Additionally, when requesting the ITCC from the jurisdictional tax officer, a non-resident of India must submit an undertaking in the required format, Form 30A. This commitment must come from the concerned person's employer or the person through whom they receive their income, and it must state that they will be responsible for paying any taxes that may become due by the ex-pat after leaving the country.

If the income tax officer is satisfied with the information provided, they will issue the ITCC in Form 30B upon receiving such an undertaking and the pertinent documents. The document will make mention of the ITCC's validity.

How to Download Tax Clearance Certificates

To download a Tax Clearance Certificate, you typically need to follow these steps:

Step 1: Log In to Tax Portal. Access the tax department's online portal where you file your taxes. This could be the Income Tax Department portal or a local tax authority's website.

Step 2: Navigate to the Certificate Section. Look for a section related to certificates or documents. Tax Clearance Certificates are usually categorized under certificates or compliance documents.

Step 3: Locate the option to request or download a Tax Clearance Certificate. This might involve filling out a form or selecting the specific tax year or period for which you need the certificate.

Step 4: Some portals may require you to verify your identity through OTP (One-Time Password) sent to your registered mobile number or email.

Step 5: Once verified, you should be able to download the Tax Clearance Certificate in PDF format.

Step 6: Save a copy of the certificate on your device and, if needed, print a hard copy for your records.

Uses of Tax Clearance Certificate

A Tax Clearance Certificate serves several important purposes, primarily related to demonstrating compliance with tax obligations and facilitating certain financial transactions. 

1. Business Transactions: Many business transactions, especially with government agencies or large corporations, may require a Tax Clearance Certificate. It assures the parties involved that the entity or individual is up-to-date with their tax filings and payments.
2. Loan Applications: Banks and financial institutions may request a Tax Clearance Certificate from individuals or businesses applying for loans. This serves as proof of financial stability and compliance with tax obligations.
3. Tendering for Contracts: When bidding for government contracts or large private tenders, a Tax Clearance Certificate is often required. It ensures that the bidder has no outstanding tax liabilities and is in good standing with tax authorities.
4. Property Transactions: During property transactions, especially for high-value transactions or transfers involving corporations, a Tax Clearance Certificate may be requested to ensure there are no tax liabilities associated with the property.
5. Legal Proceedings: In legal matters, particularly related to financial disputes or settlements, a Tax Clearance Certificate might be requested to confirm tax compliance status.

What Categories of Individuals Apply for Tax Clearance Certificates?

• People Who are Not Indian Citizens

An individual with income derived from any source in India who is not a resident of India but has travelled there for business, employment, or other purposes must obtain a tax clearance certificate before leaving the country.

An individual not a resident of India can obtain a certificate from their employer or the source of their income. However, in most cases, the employer or the person who receives income must inform the tax authorities that they will cover the tax owed by the employee or the person from whom the income was received if the employee is not a resident of India.

It should also specify that the responsible authority must immediately issue a no-objection certificate in Form No. 30B after receiving the undertaking.

• People Who are Indian Citizens

When traveling outside of India, residents only need to provide their permanent account number, the reason for their trip, and the approximate length of time they will be gone.

Most Indian nationals and residents are exempt from needing a tax clearance certificate. However, such an order may be made if the income tax authorities determine that a person must obtain a tax clearance certificate to travel abroad due to several factors. Only with the Chief Commissioner of Income-approval tax can this order for passing an order be obtained.

What Happens If the Income Tax Clearance Certificate is Not Submitted

The responsibility to verify the passenger's Income Tax Clearance Certificate falls on the carriage owner (aircraft or ship). They are responsible for paying the passenger's taxes if they do not.

Additionally, the owner of a chartered ship or plane is responsible for paying all taxes owed and obtaining an Income Tax Clearance Certificate. If he does not, the government will treat it as a tax arrear on his part and seek to recoup it.

Conclusion

In summary, a Tax Clearance Certificate is a document that the tax authorities issue certifying that the taxpayer has paid all of his tax debts or is not responsible for paying taxes.

This article describes the requirement for a Tax Clearance Certificate and its various uses.

Disclaimer: The information presented here is general and is only intended for educational purposes.