New Tax Clearance Requirement for Leaving India in 2024
According to Section 230 of the Income-tax Act, individuals living in India should now obtain a certificate from the authorities before leaving the country
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As per the Finance Bill, 2024, any person domiciled in India now needs to obtain an income tax clearance certificate to leave the country.
Clause 71 of the Bill seeks to amend section 230 of the Income-tax Act relating to tax clearance certificates. This amendment will take effect from 1st October 2024.
“Sub-section (1A) of the said section, inter alia, provides that no person who is domiciled in India, shall leave India, unless he obtains a certificate from the income-tax authorities stating that he has no liabilities under the Income-tax Act, or the Wealth-tax Act, 1957, or the Gift-tax Act, 1958, or the Expenditure-tax Act, 1987, or he makes satisfactory arrangements for the payment of all or any of such taxes which are or may become payable by that person. Such certificate is required to be obtained where circumstances exist which, in the opinion of an income-tax authority render it necessary for such person to obtain the same,” the Finance Bill stated.
“It is proposed to amend the proviso to the said sub-section by inserting the reference of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 therein, so as to impose the liabilities under the said Act for the purposes of obtaining the certificate relating to no liabilities,” it further added.
In simple terms, according to Section 230 of the Income-tax (I-T) Act, any individual living in India should now obtain a certificate from the income tax authorities before he/she leaves the country, confirming that the individual has no pending taxes or has made alternate arrangements for paying the outstanding sum
In the 2024 budget, a proposal was put forward to eliminate penalties for non-disclosure of foreign assets, adding unnecessary burden to those who overlooked modest holdings.
According to sections 42 and 43 of the Black Money Act, a standard penalty of Rs 10 lakh is imposed if the unreported assets were worth below Rs 20 lakh.
The recent changes will not affect Indian citizens who are giving up their citizenship to get foreign citizenship. Indian law requires these individuals to surrender their Indian passports and get a renunciation certificate from the Indian authorities.
When applying for this certificate, the Ministry of Home Affairs and local police will investigate the applicant’s background, revealing any unresolved legal issues or unpaid taxes, which could affect the decision on whether the renunciation can proceed.
The Black Money Act of 2015 targets those individuals who fail to disclose their foreign income and assets. Sections 42 and 43 of the Act address issues reporting foreign income and assets.
While Section 42 applies to residents who haven’t reported their foreign assets or income properly, Section 43 imposes penalties on those who have inaccurately reported their foreign assets or income in their tax returns.
