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. 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. 

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.

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.

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

The facility to apply for ITCC online is still not available. If a non-resident who has derived income from any Indian source seeks the certificate, they can do so by submitting an undertaking 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. 

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. 

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.

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.