1224. Simplification of procedure regarding tax clearance certificate in case of a foreign employee not domiciled in India
1. Under the provisions of section 230 of the Income-tax Act, 1961 it has been prescribed, inter alia, that a person who is not domiciled in India cannot leave the territory of India by land, sea or air unless he obtains a certificate from the “Competent Authority” that he has no liability under various Acts mentioned therein, or that satisfactory arrangement have been made for the payment of all or any of such taxes which are or may become payable by that person.
2. One of the methods of ensuring that satisfactory arrangements have been made for the payment of such taxes is by way of obtaining guarantee from the employer of the person leaving the country that any tax found due will be paid by the employer (guarantor). Under the existing procedure the guarantee tendered by the guarantor ceases to be operative three months after the return of the employee to India if the employee remains in India during the said period of three months and the guarantor gives prompt notice to the Assessing Officer concerned of the employees return to India.
3. A number of representations have been received by the Board that the procedure of obtaining the tax clearance certificate in the cases of foreign employees not domiciled in India, each and every time such employee wants to go abroad, is cumbersome and time consuming. In order to alleviate this difficulty, it has been decided to provide the facility of one-time clearance certificate to the foreign employee not domiciled in India who has a fixed tenure of service in India up to five years, to travel abroad any number of times during the period of the contract of his service.
4. This one-time clearance certificate will be given in the case of those foreign employees whose employer gives a guarantee in the prescribed form that if any tax is found due against the employee during the entire period of the contract of service plus two years, the some shall be paid by the employer. The guarantee may also cover the tax liabilities of the spouse and dependents of the foreign employee; in such a case the spouse and dependents of the employee would also be entitled to the benefit of one-time clearance certificate. The revised form of guarantee which is to be used for the above purpose is enclosed. The above procedure will apply only in such cases where the employer of the foreign employee is an Indian concern, or a foreign concern which is assessed to tax in India and has a fixed place of business in India. Where the foreign employee is not interested in obtaining such a guarantee from the employer or the employer is not willing to furnish such a guarantee, the hitherto existing procedure will continue to be followed.
5. In cases where the guarantee in the revised form is furnished, the tax clearance certificate to be issued by the Assessing Officer, Foreign Section will be made valid for journeys to be performed by the foreign employee up to the last date of the contract of service as mentioned in the guarantee form. The concerned Chief Commissioner/Director General of Income-tax will have the right to withdraw the facility in suitable cases in the interest of revenue.
FORM OF GUARANTEE
(On a non-judicial stamp paper of the appropriate amount)
To
The President of India
through
The Commissioner of Income-tax
(Designation)
and
The Income-tax Officer/Assistant
Commissioner of Income-tax/
Deputy Commissioner of Income-tax
(Designation)
Sir,
In consideration of a certificate being issued by the Income-tax Officer/Assistant Commissioner of Income-tax/Deputy Commissioner of Income-tax (Ward/District/Circle/Range) under the provisions of section 230 of the Income-tax Act, 1961, in favour of (NAME OF FOREIGN EMPLOYEE, SPOUSE AND DEPENDENTS) [hereinafter referred to as the assessee(s)] notwithstanding that the assessee(s) has/have not made satisfactory arrangements for the payment of all or any of the tax/ taxes (which terms wherever they occur in these presents include penalty and interest) which are at present due by [NAME OF ASSESSEE(S)] and payable by him/her/them during the entire period of contract of service of (NAME OF FOREIGN EMPLOYEE) with the undersigned, ending on…………… ………………..and during a further period of two years ending on*……………………………..; We, the undersigned (NAME OF UNDERSIGNED), do hereby unconditionally and irrevocably guarantee due payment on demand and without demur to the Central Government of all the taxes which are or may become due and payable by the assessee(s) under the Indian Income-tax Act, 1922, the Income-tax Act, 1961, the Excess Profits Tax Act, 1940, the Business Profits Tax Act, 1947, the Wealth-tax Act, 1957, the Expenditure Tax Act, 1957 and the Gift-tax Act, 1958, or any one or more of the said Acts or other tax or taxes imposed under the authority of the Government of India.
2. My/our liability under this guarantee shall be co-extensive with that of the assessee(s).
3. I/We further agree that any amount certified by the Income-tax Officer/Assistant Commissioner of Income-tax/Deputy Commissioner of Income-tax having jurisdiction in the case of the assessee(s) as due and payable by the assessee(s) under all or any of the aforesaid enactments or other enactment(s) shall be accepted by me/us as conclusive evidence of the said amount being due and payable as aforesaid, and no such amount shall, in any case and under any circumstances, be disputed.
4. This guarantee shall apply to and secure the ultimate amount of tax which may be due or become due from the assessee(s) to the Central Government under all or any of the aforesaid enactments and it shall not be determined by me/us except on the terms of my/our making full provision for the payment of all such taxes to the satisfaction of the Income-tax Officer/Assistant Commissioner of Income-tax/Deputy Commissioner of Income-tax having jurisdiction in the matter.
5. Further, I/we expressly agree that my/our liability to pay such taxes to Central Government under the terms of this guarantee shall not in any way be affected or discharged by reason of any time and/or other indulgence (including the payment of tax by instalments being granted to the assessee(s) or by reason of any other arrangement or arrangements for the payment of taxes under all or any of the aforesaid enactments being entered into with the assessee(s) or his/her heirs or representatives in exercise of all or any of the powers vested in the taxing authority under the said enactments and, in particular, that I/we, the guarantor(s) shall not be released from any of our liabilities under this guarantee by reasons of exercise of the above-mentioned powers by the Taxing Authority or by any deviations of these presents, or by releasing to the assessee(s) any or all of his/her/their properties or assets, and it is also agreed that vis-a-vis the Central Government, I/we the guarantor(s) hereby waive any of my/our rights as surety or otherwise which may at any time be inconsistent with any of the provisions of this guarantee.
6. Further, I/we hereby agree and declare that this guarantee shall not be determined or otherwise affected by any death/** dissolution or liquidation, but shall remain in full force and effect against me/us and my/our estate/assets until such amount of tax as is or may become due and payable hereunder is paid in full.
7. It is further declared and agreed that without prejudice to any other remedies open to the Central Government for recovering any tax which is or may become due and payable under this guarantee, the Central Government will be entitled to recover the said tax from me/us the guarantor(s) on demand, in accordance with the rules contained in the Second Schedule to the Income-tax Act, 1961, or any modification thereof from time to time , and it shall not be necessary for the Central Government to initiate and/or exhaust any legal proceedings against the assessee(s) for the recovery of any tax as is aforementioned before suing me/us for the recovery of the same.
8. It is further agreed that this guarantee will cease to be operative on………….(indicate the date as at, above) if , and only if , I/we give notice before the date of expiry of the contract of service to the Income-tax Officer/Assistant Commissioner of Income-tax/Deputy Commissioner of Income-tax having jurisdiction in the case, regarding revoking the terms hereof and permitted by the Central Government.
(** please strike out whichever is not applicable)
Place :
Yours faithfully,
Date :
Signed in the presence of :
1. ……………………………………………………….
2. ……………………………………………………….
(Witnesses)
And certified as correct.
Accepted for and on behalf of the President of India.
Circular : No. 546, dated 4-10-1989
