Income Tax Clearance Certificate: Meaning, Significance & Steps to Download

Some transactions in India require you to obtain an Income Tax Clearance Certificate (ITCC). It is an essential certificate that tax authorities issue to you. But who needs it and why? 

In this blog, we will cover everything about what this certificate is, its significance and how to obtain it. Read to find out.

What is an Income Tax Clearance Certificate (ITCC)?

An income tax clearance certificate, as the name suggests, is a statement from the Indian tax authorities that you have cleared all your tax dues and hold no responsibility for paying any taxes. However there may be future tax liabilities depending on future transactions. The revenue department of a state government is responsible for issuing it. A person who meets the following three criteria must obtain the certificate:

• The concerned person is not domiciled in India 
• He/she is visiting India for any purpose of business or vocation
• They have generated income from an Indian source

Overall, anyone who is not an Indian citizen but has a source of income in India, maybe from a business or employment in India, has to obtain an ITCC. 

The certificate may include coverage for sales tax, corporate tax, unemployment tax, and other applicable taxes, depending on the specific tax regulations of the state. 

If the income tax officer is satisfied with the submitted information, the Income Tax Clearance Certificate (ITCC) will be issued in Form 30B. This form will also specify the validity period of the ITCC.

It is to be noted that a person who is a resident of India does not need to obtain an ITCC. Instead, they need to furnish their Permanent Account Number (PAN) and also the reason for which they are travelling outside India. However, if concerned authorities suspect their involvement in any financial irregularities, they can ask them to get ITCC.

Note: It is clarified by the Central Board of Direct Taxes (CBDT) under section 230 that it is not mandatory to secure a tax clearance certificate for the individual domiciled in India before leaving the country. This amendment will be effective from October 1, 2024.

Who Requires an Income Tax Clearance Certificate

As per Indian tax laws, individuals who are not settled in India are issued an Income Tax Clearance Certificate (ITCC). These individuals typically earn income from India through business, employment, or other professional activities, and are required to obtain tax clearance before departing the country.

The three main criteria for requiring an ITCC are:

• Individuals who is not an Indian citizen,
• Individuals who are visiting India for business, employment, or professional purposes, and
• Individuals who have earned income from any source within India.

Note: The ITCC document is generally required for non-domiciled individuals, not Indian citizens, when traveling abroad. However, Indian citizens are not typically required to obtain an ITCC unless specifically directed by the Income Tax Department.

How to Get an Income Tax Clearance Certificate Online in India?

The facility to apply for ITCC online is still not available. However Individuals need to file a proclamation with their employer or the source from which they are receiving income. A non-resident who has derived income from any Indian source can get the certificate, by submitting an undertaking in the prescribed format from their employer in form 30A. The undertaking from the employer states that in case any tax payment is due from the ex-pat, the employer takes the responsibility to pay it on their behalf if they have already left the country. 

If the Income Tax Officer is satisfied with the documentation and information provided, the Income Tax Clearance Certificate (ITCC) will be issued in Form 30B

Documents Required for Income Tax Clearance Certificate (ITCC):

To apply for an Income Tax Clearance Certificate, the following documents are typically required:

1. Application Form (Form 30A): This is the primary application form. Ensure all information provided is accurate and up to date.
2. Passport Copy: A copy of your valid passport is needed for identity verification and travel documentation.
3. Proof of Tax Payment: Submit evidence of tax payments made in India, including income tax returns for the past three assessment years.
4. PAN Card Copy: A copy of your Permanent Account Number (PAN) card is required for tax identification purposes.
5. Other Financial Documents: Depending on your financial situation, you may be asked to provide additional documents such as bank statements, salary slips, investment proofs, or other relevant financial records.

How to Download Tax Clearance Certificate?

As already mentioned, this service is not available online. To apply for ITCC, the expatriate has to submit Form 30A with all the relevant documents. 

On receipt, if the income tax officer is satisfied, he/she will issue the tax clearance certificate in Form 30B. Remember, the certificate comes with a validity and the date is mentioned on the certificate itself.

What is Form 30C in Income Tax?

Indian residents, in general, don’t need to obtain ITCC if they are travelling abroad for any reason other than to leave the country permanently. A valid PAN card suffices in such a situation. However, they still need to file form 30C stating that they are travelling outside the country along with purpose and estimated duration of their trip. 

However, there are situations in which a domiciled person may be asked to obtain ITCC. 

• The person has involvement in financial or tax irregularities of any manner and tax authorities require their presence for an investigation.
• They have outstanding tax arrears exceeding Rs. 10 lakhs and it has not been stayed by any authority. 

In general, most Indian citizens and residents are not required to obtain an ITCC. However, if a person is suspected of serious financial misconduct, is under legal investigation, or if there is a likelihood of a significant tax demand, the Income Tax Department may specifically order them to secure a clearance certificate before departure from the country.

Even with these two prevailing conditions, ITCC from a domiciled Indian can only be obtained after receiving an order from the Chief Commissioner of the Income Tax Department.

Is it Mandatory to Submit Form 30C?

If a domiciled resident is travelling abroad without any intention of permanently leaving the country, then it is mandatory for him/her to file Form 30C and furnish his/her PAN card details.

Who Will Issue Tax Clearance Certificate?

Once the concerned person or their employer has filed the undertaking in the required form, the documents are verified. Upon completion of successful verification and approval, the revenue department of the concerned state government issues the income tax clearance certificate in the name of the concerned person. 

What is the Use of a Tax Clearance Certificate?

Under the Income Tax Act, any non-resident who has derived income from any source in India during their stay is liable to pay taxes on such income. The income tax clearance certificate is a statement certifying that the individual leaving India has cleared all their tax dues for a specified period when they were in the country. It also states that if any tax liability arises after they have left, their employer through which they derived their income shall take responsibility to clear those dues. 

The certificate thus clears the ex-pat from any legal responsibility in the future. It allows them to leave the country without any worries.

Tax Clearance for Non-Domiciled Individuals

For individuals not domiciled in India, a slightly different procedure applies when obtaining an Income Tax Clearance Certificate (ITCC). Individual or his employer must submit Form 30A, which is an undertaking ensuring the payment of any tax liabilities that may arise after your departure from India.

Once the Income Tax Officer has reviewed and is satisfied with the documentation, a No Objection Certificate (NOC) also known as a Tax Clearance Certificate (TCC) will be issued in Form 30B. This certificate confirms that you have met all applicable tax obligations up to the date of departure and will clearly state the period of its validity.

Relevant Forms:

• Form 30A – Undertaking under Section 230(1)
• Form 30B – No Objection Certificate for Non-Domiciled Individuals

By completing these steps and submitting the required forms, you can ensure a hassle-free and compliant departure from India.

What Happens If You Don’t Submit Income Tax Clearance Certificate?

A non-resident leaving the country needs to clear all their tax dues, if any, before their departure from India. Now, if such a person doesn’t submit their ITCC, two conditions may arise.

• The aircraft or ship taking them out of the country must check all the necessary documents before it takes off. In case of failure, they become personally liable for any tax dues on behalf of the non-resident.
• If the individual is leaving the country through any privately owned carriage, it is their responsibility to clear their dues. They also need to obtain ITCC before their departure. Failing to do so, the Tax Authority of India can take all necessary measures to recover the tax due.

Final Word

ITCC is an important document to clear any individual from any tax liability. Even though it is not necessary for resident Indians, it is mandatory for non-residents to obtain it before departure. They can only obtain this certificate upon clearing their tax dues and submitting the necessary documents.