Tax Clearance Certificate under Income Tax Act

Navigating income tax requirements when leaving India is crucial to ensure compliance with the law. This article outlines the procedures and forms necessary for individuals departing India, both those domiciled in India and those who are not. From tax clearance certificates to no objection certificates, this guide provides an in-depth look at the rules governing the process.

1. Every person

a. who is not domiciled (country that a person treats as their permanent home) in India;

b. who has come to India in connection with business, profession or employment; and

c. who has income derived from any source in India

shall before leaving the territory of India by any means furnish an undertaking in Form 30A from his employer or any such person to the income-tax authority (prescribed under rule 42(1)) who is in receipt of the income to the effect that tax payable on such income by such person who is not domiciled in India shall be paid by his employer or such other person.

The Income tax authority shall on receipt of such undertaking provide a No Objection Certificate in Form 30B for leaving India if satisfied with the information provided.

Provided that above provisions will not apply to a person who is not domiciled in India but visits India as a foreign tourist or for any other purpose not connected with his business or profession or employment.

2. Every person who is domiciled in India at the time of his departure from India shall furnish the following information in Form 30C to the income-tax authority (prescribed under rule 42(2)):

a. Copy of Permanent Account Number (PAN)

b. Purpose of his visit outside India

c. Estimated period of his stay outside India

3. Every person who is domiciled in India at the time of departure from India and in respect of whom circumstances exist which in the opinion of income-tax authority makes it necessary to obtain tax clearance certificate from the income-tax authority stating that he has no liability under Income-tax Act, Wealth Tax Act or the Gift-tax Act or the Expenditure Act or satisfactory arrangements has been made for payment of all taxes, shall not leave India through any means without obtaining certificate from income-tax authority. An application should be made in Form 31 and a Tax Clearance Certificate is issued by the income-tax authority in Form 33.

4. It is not necessary to obtain certificate by the person domiciled in India unless he records the reason and obtain the prior approval of the Principal Chief Commissioner of Chief Commissioner of Income-tax.

5. If the owner of any ship or aircraft carrying persons from any place in India to a place outside India allows any person referred above without first satisfying that such person is in possession of certificate, he shall be liable to pay the taxes, if any payable by such person as it is determined by the concerned Assessing Officer.

The above procedure is to be followed manually as no online facility is available to file the form and the purpose behind obtaining tax clearance certificate and no objection certificate is that nobody leaves India without payment of tax liability which they were liable to pay.

Further, following additional documents which may be asked by the Income-tax department:

a. Copy of Passport and Visa

b. Copy of past 3 years tax returns

c. Invitation letter from the Employer

Reference – Section 230 read with rule 42 & 43 of Income-tax

Summary

Procedures and Forms for Departing India:

1. Non-Domiciled Individuals: Individuals who are not domiciled in India but have income derived from Indian sources must provide an undertaking in Form 30A from their employer or relevant person to the income-tax authority. This undertaking states that the employer or person will pay the applicable tax on the individual’s Indian income. Upon receipt of this undertaking, the income tax authority issues a No Objection Certificate (Form 30B), allowing the individual to leave India.

However, this requirement does not apply to foreign tourists or individuals visiting India for non-business or non-employment purposes.

2. Domiciled Individuals: Individuals who are domiciled in India at the time of departure need to furnish information in Form 30C to the income-tax authority. This includes a copy of the Permanent Account Number (PAN), the purpose of the visit outside India, and the estimated stay period.

3. Tax Clearance Certificate: Domiciled individuals with potential liabilities under various tax acts must obtain a tax clearance certificate to leave India. An application in Form 31 is submitted to the income-tax authority. Upon approval, a Tax Clearance Certificate (Form 33) is issued, confirming the absence of tax liabilities or satisfactory payment arrangements.

4. Approval Requirement for Domiciled Individuals: Domiciled individuals need to obtain approval from the Principal Chief Commissioner of Chief Commissioner of Income-tax if they intend to leave India without obtaining a certificate. This requirement underscores the importance of tax compliance.

5. Liability for Transport Operators: Transport operators allowing individuals to leave India without the required certificates may become liable for the taxes payable by those individuals, as determined by the relevant Assessing Officer.

Conclusion: Understanding the income tax rules and procedures for departing India is essential to prevent any potential liabilities. Whether you’re domiciled in India or a non-domiciled individual, following the correct forms and procedures is crucial to ensure compliance. Be aware of the various forms, such as Form 30A, Form 30B, Form 30C, Form 31, and Form 33, which are integral to the process. Remember that tax compliance is a vital aspect of departing India, safeguarding both individuals and transport operators from unnecessary liabilities. Always consult with experts before making any decisions based on this information.

Sample format of forms are given below:

a. Form 30A  -Form of undertaking to be furnished under sub-section (1) of section 230 of the Income-tax Act, 1961

b. Form 30B – No Objection Certificate for a person not domiciled in India under section 230(1) of the Income-tax Act, 1961

c. Form 30C – Form for furnishing the details under section 230(1A) of the Income-tax Act, 1961

d. Form 31 – Application for a certificate under the first proviso to sub-section (1A) of section 230 of the Income-tax Act, 1961

e. Form 33 – Clearance certificate under the first proviso to subsection (1A) of section 230 of the Income-tax Act, 1961

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Disclaimer: This article serves an educational purpose and should not be considered as professional advice. Consultation with a qualified individual is recommended before making any decisions based on the content provided. The author bears no responsibility for any actions taken based on this article.