Government Confirms No Changes to Tax Clearance Policy for International Travel

Government Clarifies Income Tax Clearance Certificate Requirement for International Travel

A recent viral claim suggesting that all Indians need an Income Tax Clearance Certificate (ITCC) before travelling abroad has triggered confusion and concern among the public. However, the government has clarified that there is no new rule or blanket requirement. The provision, which has been renumbered under the new income-tax act, applies only in cases involving serious tax dues or investigations and does not affect the vast majority of travellers.

The government source informed Moneycontrol that reports claiming all travellers must obtain an ITCC before leaving India are factually incorrect. The provision applies only in specific circumstances under the law. The existing framework continues unchanged, and it is not a requirement that every person leaving India must file any form. The provision applies only in specific cases, and not to the general public travelling abroad.

According to tax experts, the income tax clearance certificate is a departmental certificate issued under Section 420(5) in Form 159. This certificate certifies that the person has met the conditions for clearance. The certificate is need under Section 420(5), and even then, it is conditional.

Read also: Court Rules Father Liable for Support of Minor Child Regardless of Mother's Income or Personal Liabilities

The Central Board of Direct Taxes (CBDT) has clearly stated the scope of such "circumstances" that warrant a tax clearance certificate. It may be required in two situations: first, if a person is needed in a case involving serious financial irregularities, and second, where there are outstanding tax demands of above Rs 10 lakh. Even in such cases, it is not automatic. The assessing officer has to give reasons and get the commissioner's approval before asking an individual to furnish the relevant declaration or certificate.

The government's clarification issued on August 20, 2024, is consistent with the interpretation provided by tax experts. It stated that it was incorrect to suggest that all Indian citizens must obtain an ITCC before travelling abroad. The law has not changed, and the requirement remains limited and case-specific. Tax expert OP Yadav said that the legal position is unambiguous — tax clearance is the exception, not the rule.