Starting 1 October, 2024, high-risk individuals leaving India will need to obtain a tax clearance certificate under the Black Money Act before their departure.
This new requirement replaces the previous rule under Section 230(1A) of the Income Tax Act, which mandated clearance certificates for liabilities under the Income Tax Act, Expenditure Tax Act, Wealth Tax Act, and Gift Tax Act for specific categories of persons.
Notably, Budget 2024 has removed the Expenditure Tax Act from this list and replaced it with the Black Money Act, 2015. This measure aims to prevent individuals with undeclared foreign assets or income from leaving the country without settling their tax obligations.
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In 2004, the Central Board of Direct Taxes (CBDT) had clarified that the following category of persons may be required to get a tax clearance certificate before leaving India:
- An individual domiciled in India
- Is accused of serious financial irregularities, and his presence is needed for the investigation
- Has tax liabilities of ₹10 lakh or more under both the Income Tax Act and the Black Money Act.
Furthermore, any income tax authority that asks for a TRC from an individual must document the reasons in writing and obtain approval from the principal chief commissioner of Income Tax or chief commissioner of Income Tax.
How to obtain the certificate?
To obtain a tax clearance certificate (TRC) under the Black Money Act before leaving India, individuals must submit a physical application to the local income tax office with the following details:
- PAN number
- Purpose of visit
- Duration of stay outside India.
The authorities will review the applicant’s income tax returns and documents to verify that they have no outstanding tax liabilities under either the Income Tax Act or the Black Money Act.
This process ensures that the individual has cleared all their tax dues before being allowed to depart the country. Once the authorities are satisfied that the applicant has no pending tax obligations, they will issue the tax clearance certificate.
CA Prakash Hegde said specific conditions for requiring the Black Money tax clearance certificate have not yet been officially notified as part of the law. The government may issue a formal circular with more details on the specific requirements. Without these conditions being formally part of the law, the clearance certificate requirement applies broadly to all individuals leaving India, regardless of their tax status or residency.
“The authorities may issue a circular in the future with more details on the specific criteria for requiring the Black Money tax clearance certificate. But as of now, the law is still unclear on the exact conditions,” Hegde added.
