What is an Income Tax Clearance Certificate?
Income Tax Clearance Certificate is a document that verifies that the individual has cleared all their tax duties and is not responsible for paying any taxes, and will take charge of any tax liabilities that may occur in the future. The state government’s revenue department issues this document and confirms that the company or the person has complied with their tax obligations as of a specific date.
The certificate may cover sales tax, use tax, franchise of corporation tax, unemployment tax, etc., depending on the state’s tax regulations.
If the income tax officer is satisfied with the information provided, ITCC will be issued in form 30B. This document will also contain information about ITCC’s validity.
Who needs an IT Clearance Certificate?
Individuals not settled in India are issued an ITCC as per IT laws. These individuals derive income from India through business, employment, or other professional purposes. They need to require IT clearance before leaving India.
Hence, these three criteria are:-
- Individuals who are not Indian citizens
- Visiting the country for business, employment, or professional purposes
- Has derived income from any source in India
Please Note:-ITCC document is required for non-domicile individuals and not Indians while traveling abroad unless specifically ordered by the IT department to receive one.
An Indian citizen will require an IT clearance certificate under the following circumstances.
- The person involved in tax irregularities and required for investigations by the IT or the Wealth-tax department.
- The person has outstanding direct tax arrears exceeding Rs 10 lakh, not canceled by the Direct Tax department.
The majority of Indian citizens and residents are not required 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, and their presence is required for legal investigation, and a tax demand may become real.
How to receive an Income Tax Clearance Certificate?
Individuals need to file a proclamation with their employer or the source from which they are receiving income. An undertaking needs to be submitted by the non-resident Indians in the required format, Form 30A. Further, a commitment is required from the employer or the source from whom the individual has received the income that he will take care of any taxes that may become due by the ex-pat after leaving the country.
If the income tax officer is satisfied with all the information provided, they will issue ITCC on form 30B.
Documents required for Income Tax Clearance Certificate
To apply for an Income Tax Clearance Certificate (ITCC), you'll need the following documents:
- Application Form (Form 30A): Ensure all details on this primary application form are accurate and current.
- Passport Copy: A copy of your passport is required for identity and travel verification.
- Proof of Tax Payment: Provide evidence of all tax payments made in India, including income tax returns for the past three years.
- PAN Card Copy: A copy of your Permanent Account Number (PAN) card is necessary for identification and verification purposes.
- Other Financial Documents: Depending on your individual circumstances, you may need to submit additional financial documents such as bank statements, salary slips, or investment proofs.
Tax Clearance for Non-Domiciled Individuals
For individuals not domiciled in India, a slightly different process applies to obtain an Income Tax Clearance Certificate. You or your employer must submit Form 30A, an undertaking guaranteeing the settlement of any post-departure tax liabilities.
Upon review, the tax officer will issue a No Objection Certificate (NOC), also known as a Tax Clearance Certificate (TCC), in Form 30B. This certificate confirms you've fulfilled your tax obligations up to your departure date and specifies its validity period.
Access the forms via these links:
- Form 30A: Undertaking under section 230(1)
- Form 30B: No Objection Certificate for persons not domiciled in India
By completing these steps and submitting the required forms, you can ensure the necessary Income Tax Clearance Certificate for a smooth departure from India.
What happens when the income tax clearance certificate is not submitted?
The carriage owner, such as an aircraft or ship, is responsible for verifying that the passenger possesses a valid Income Tax Clearance Certificate. If the passenger is found to have outstanding taxes, the carriage owner may be held responsible for paying these taxes on their behalf.
Furthermore, in the case of a chartered ship or plane, the owner is responsible for paying all taxes owed and obtaining the necessary Income Tax Clearance Certificate. Please do so to avoid the government treating it as a tax arrear and seeking to recover the owed amount. Carriage owners must comply with all relevant tax regulations to avoid potential legal and financial consequences.
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