Certain transactions in India require obtaining a No Due or No Clearance or an Income Tax Clearance Certificate (ITCC). This is an important certificate issued by the tax authority to some specific individuals.
What is a No Due or No Clearance or an Income Tax Clearance Certificate (ITCC)?
An income tax clearance certificate is a certificate issued by the Indian Tax Authority that clarifies that you have paid all tax dues. It is issued by the tax authorities to certify that the person leaving India has no taxes due in India or that he has made satisfactory arrangements to meet future tax obligations.
Requirement of an ITCC
As per
Section 230 of the Income Tax Act, 1961, anyone who meets the criteria below cannot leave the Indian territory via air, land or sea until they provide the tax authority an undertaking in Form-30A from their employer or the individual from whom they receive the income generated in India.
- Not based in India,
- Visiting India for business, professional or employment purposes,
- Generates income from any sources in India.
None of the above shall be applicable on an individual who is not based in India but is visiting the country as a tourist or for any other reasons that are not related to business, profession or employment.
Basically, any foreign national visiting India for business, profession or employment-related reasons and who generates income from India must apply for a Tax Clearance Certificate in India before they leave the country. As such, if anyone fulfills all the three above mentioned conditions and plans to leave the country, they MUST procure an Income Tax Clearance Certificate.
| Majority of Indian nationals and residents are not mandated to obtain an ITCC. However, if an individual is found to be involved in some financial irregularities and they need to be present for the relevant legal investigation, they may be asked to obtain an ITCC before they can be allowed to leave the territory of India. |
Who does not Require an ITTC?
An Indian resident who is traveling abroad for any reason apart from permanently leaving the country only needs to declare their Permanent Account Number (PAN) and is not required to get an Income Tax Certificate.
How to Obtain an ITTC?
Individuals can notify their employer or the person from whom they receive income in India about obtaining an income tax certificate.
- When requesting for an ITTC, an individual, who is not a resident of India, is required to submit an undertaking in the prescribed format.
- Such an undertaking must be received from the individual’s employer or the person from whom they receive income from India.
- Further, such an undertaking must state that any tax dues of the non-resident who is leaving the country shall be paid by the individual who is submitting such a commitment.
Who can Apply & What is the Process for applying for Tax Clearance Certificates?
Individuals who are not Indian Citizens
An individual, who is a non-resident and generates income from any source in India, has traveled to the country for any matters pertaining to business, employment or other reasons is required to get an ITCC.
A non-resident individual can get a income tax clearance certificate from the authorized tax official by submitting an undertaking in Form-30A. This undertaking must be received from the individual’s employer or the person from whom they received income from India. Further, this undertaking must state that any tax liabilities of the non-resident would be paid by them.
After receiving this undertaking and the necessary documents, if the Chief Commissioner or the Director General of Income Tax is satisfied with the details provided, they shall issue an income tax clearance certificate.
The validity of this ITCC shall be mentioned in the certificate itself.
People who are Indian Citizens
Residents while traveling outside India need to provide the following information:
- PAN.
- Purpose for the trip.
- Period they shall be leaving for.
Majority of Indian nationals and residents are not required to obtain an ITCC. Although if the income tax officials have a reason for which an individual must get an ITCC, such an order may be made for traveling due to a number of reasons. The income tax authorities can only pass orders after getting an approval in advance from the Principal Chief Commissioner or the Chief Commissioner of Income Tax.
Majority of Indian nationals and residents do not need an ITCC, except when:
- They are part of grave financial violations and need to be present for legal investigation of matters pertaining to the law. It can be predicted that the tax demand will materialize.
- They have direct tax dues above INR 10 lakhs that has not been stayed by any Income Tax authority.
Individuals residing in India only need to provide their PAN, reason for traveling and the time period for which they will be leaving. This must be furnished in Form-30C and accompanied by an application in Form-31 that need to be submitted to the Chief Commissioner of Income Tax before leaving the country.
After receiving this undertaking and the above-mentioned necessary documents, if the Chief Commissioner or the Director General of Income Tax is satisfied with the details provided, they shall issue an income tax clearance certificate, with the validity of this ITCC mentioned in the certificate.
Penal & Other Consequences in Case of Non-Compliance
In certain instances, it is legally required to get an ITCC and failing to comply with the regulations can incur significant penalties and consequences. If the Income Tax Clearance Certificate is not obtained when it is necessary to get one, the tax officials can stop you from leaving the country via air, land or sea by instructing the immigration authorities. You shall only be allowed to leave after obtaining an ITCC.
| The owner of the transport, such as the aircraft or ship, is responsible for ensuring that the passenger has a valid income tax clearance certificate and if it turns out that the passenger has not paid the taxes, the owner of the transport may be held responsible for paying these taxes on their behalf. |
In addition, the owner of the chartered ship or plane is obliged to pay all taxes and obtain the necessary income tax certificate. Carriage owners must comply with all relevant tax regulations to avoid potential legal and financial consequences.
In the matter of
Mailakkattu Varghese Uthup, a company’s former director was stopped from leaving the country as they were responsible for certain tax dues of that former company. They were barred from leaving due to the legal provisions pertaining to ITCC.
Failing to adhere to the laws that deem it mandatory to get an ITCC can create a delay or restriction in getting an Indian visa for any following visits to the country for anything related to business, work or employment.
Conclusion
An ITCC is basically a certificate that guarantees that a taxpayer has cleared all their dues and is not responsible for any tax payments.
It is imperative to have a thorough understanding of the rules and regulations pertaining to taxation in India. Irrespective of whether you are a resident or non-resident of India, it is highly important to adhere to the appropriate regulations and procedures. Further, you must aptly handle, fill and submit the relevant forms associated with ITCC, including Form-30A, Form-30B, Form-31, and Form-33. Remember that tax compliance is an important part of exiting India as it protects both individuals and carriage owners from unnecessary liabilities.
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