Tax Clearance Certificate: Is a tax clearance certificate necessary to go abroad? CBDT told..

The Central Board of Direct Taxes has denied the news of making it mandatory for all citizens to show a Tax Clearance Certificate for foreign travel. For some days there were reports that the government has made a provision in the budget that every Indian citizen going abroad will have to show a Tax Clearance Certificate.

Now the Central Board of Direct Taxes (CBDT) has issued a clarification regarding Section 230 of the Income Tax Act, 1961, which states that all taxpayers must get approval from the department before leaving the country. Tax Clearance Certificate will be applicable only in special circumstances. CBDT has said that as per Instruction No. 1/2004, dated February 5, 2004, a Tax Clearance Certificate is required only for those persons who are involved in serious financial irregularities or who have direct tax dues of more than Rs 10 lakh, provided that these dues have not been stopped by any authority.

The proposal was placed in the Finance Bill.
Finance Minister Nirmala Sitharaman had proposed to obtain a Tax Clearance Certificate in the Finance Bill, citing the Black Money Act, 2015. After this, a rumor spread that it would be mandatory for everyone to get TCC before going abroad. However CBDT has clarified that this proposal is only for cases related to the Black Money Act, not for everyone.

Issuing TCC is not an arbitrary process.
CBDT has said that issuing a Tax Clearance Certificate is not an arbitrary process. It requires prior approval and documentary reason from the Chief Income Tax Commissioner or Income Tax Commissioner. The certificate confirms that the person does not owe any tax under various tax laws including the Income Tax Act, Property Tax, Gift Tax Act, Expenditure Tax Act, and Black Money Act, of 2015.