Summary: An Income Tax Clearance Certificate (ITCC) is required under Section 230 of the Income Tax Act, 1961, for non-residents earning income in India before leaving the country. This certificate ensures that the individual has cleared all tax dues on their income earned during their stay. Non-residents visiting India for employment, business, or professional purposes must apply for ITCC by submitting an undertaking in Form 30A through their employer or income provider. The process is offline, requiring documents like a passport, visa, Form 30A, proof of tax payment, and an affidavit confirming no pending tax demands. Employers must have a PAN to furnish the undertaking, while the applicant may not necessarily require a PAN unless filing returns. ITCC is not mandatory for tourists or those without Indian income. In rare cases, residents involved in financial irregularities or with tax arrears exceeding ₹10 lakhs may also need ITCC. The certificate safeguards non-residents from future legal or tax liabilities and can be checked by airlines or ships before departure. These days the Income Tax Clearance certificate is one of the most talked about topics under income tax.
Introduction: Many people visit India for the purpose of employment/business or profession, such people may have an income in India and are liable to pay taxes in India. These people who visit India for the purpose of employment/business or profession can be required to produce an Income Tax Clearance certificate issued by the Indian Tax department at the time of or before leaving the country to determine if they have paid the full amount of tax on their income earned and accrued in India.
As per section 230 of the Income Tax Act’1961:
A person who is not domiciled in India and who comes to India for the purpose of employment or vocation/business or profession and who has an Income in India shall not leave the territory of India by land, sea or Air unless he has produced an undertaking in the prescribed form from his employer or the person from whom he is in receipt of Income in India, that the tax payable by the person who is not domiciled in India shall be paid by the employer or person providing the income in India.
The prescribed authority on receipt of such undertaking in the prescribed form shall issue a no objection certificate for leaving in India to the person not domiciled India.
It is this No objection certificate which is issued by the prescribed authority that is called the Indian Income Tax clearance certificate (ITCC).
Therefore, only a person who satisfies the below mentioned criteria is required to get ITCC from the prescribed authority:
- The concerned person is not domiciled in India
- He/she is visiting India for any purpose of business or vocation/employment
- They have an income from any source in India
Q. How can we apply for ITCC from the Tax Department?
A. You can apply for the ITCC by furnishing an undertaking in Form 30A as per the income tax rules.
The said form is not in online mode on the IT Portal yet and therefore has to be applied for in offline mode.
Q. Who has to furnish an undertaking in form 30A?
A. The undertaking in Form 30A is to be furnished by the person who provides income (whether in consideration of employment or business etc) to the person not domiciled in India and who has come to India on a visit for business or employment.
For example: In case of a person who comes to India for employment and earns salary income, this undertaking is to be furnished by the employer of such person who provides salary income to the said person not domiciled in India.
Q. Who has to apply for the Tax clearance certificate?
A. A person who is not domiciled in India and who comes to India for the purpose of employment or vocation/business or profession and earns an Income in India shall apply for the Income Tax clearance certificate (ITCC) before leaving India.
Q. Whether the applicant or the person providing the income in India/employer needs a PAN in India for application of form 30A?
A. In the opinion of the author, the applicant of Income Tax clearance certificate does not compulsorily need a PAN in India although if such person is earning income in India and is liable to file ITR in India, he/she will be requiring a PAN to do so and the ITCC can be applied with such PAN.
However, the employer or person providing the income in India has to compulsorily have a PAN in India and the same has to be quoted in the undertaking in Form 30A.
Q. What are the documents that maybe required to apply for the ITCC in India?
A. The documents required for getting the ITCC include the following:
- Copy of passport of the person not domiciled in India and who is visiting India and earning an income in India.
- Undertaking in Form 30A
- Invitation letter from the Employer or the person providing income/employment or vocation in India.
- Copy of ITR of the person not domiciled in India in case the person has a PAN in India and has filed return in India.
- Proof of payment of taxes
- Affidavit stating that he does not have a demand of Income Tax in India alongwith a screenshot of the demand outstanding section on the Income Tax Portal.
- Copy of Visa of the person visiting India
- Copy of ticket to the foreign country
- Any other documents to prove he has paid the due taxes in India
Q. For whom is the ITCC not applicable i.e who is not required to take an ITCC in India?
A. The ITCC is not required to be taken by the person who comes to India as a tourist i.e on a tourist visa and does not have any Income in India. Also, not applicable for a person who is not domiciled in India and has come to India for a purpose other than for employment, vocation or business/profession and has no income in India.
Q. Does a person domiciled in India also require an ITCC?
A. A person domiciled in India may also require an ITCC under special circumstances and in rare cases. The CBDT, vide its Instruction No. 1/2004, dated 05.02.2004, has specified that the tax clearance certificate under Section 230(1A) of the Act, may be required to be obtained by persons domiciled in India only in the following circumstances:
i. where the person is involved in serious financial irregularities and his presence is necessary in investigation of cases under the Income-tax Act or the Wealth-tax Act and it is likely that a tax demand will be raised against him, or
ii. where the person has direct tax arrears exceeding Rs. 10 lakhs outstanding against him which have not been stayed by any authority.
Q. Why get an Income Tax Clearance Certificate (ITCC)?
A. Any person not domiciled in India i.e any non-resident who comes to India and 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 certificate certifying that the individual leaving India has cleared all their tax dues for a specified period when they were in India.
The ITCC also states and safeguards that if any tax liability arises after such non-resident has left the country, their employer or person through whom they derived their income shall take responsibility to clear those dues.
The certificate thus clears the way for ex-pats and other non-residents to leave the country and saves them from any legal responsibility in the future.
Q. Who can check the ITCC?
A. In case of a person leaving India, the concerned person of the airplane or the ship taking the Non-resident out of the country may check and require the ITCC along with the other documents before them leaving the country. The failure to do so may make them liable for taxes if any in the future.
*****
(The author is a Chartered Accountant and can be contacted at info@youronlinefilings.in or capratikanand@gmail.com or Mobile: +91-9953199493)
Author Bio
