The Central Board of Direct Taxes (CBDT) clarification on ITCC

The Central Board of Direct Taxes (CBDT) clarification on ITCC

The arm of Central Board of Direct Taxes (CBDT) today clarified the requirements for Indian domiciled individuals to obtain an Income Tax Clearance Certificate (ITCC) following recent amendments to the Income-tax Act, 1961 (ITA).

The clarification comes in response to erroneous reports suggesting that all Indian citizens are now required to obtain an ITCC before leaving the country. The CBDT emphasizes that this is not the case.

Background:

Section 230(1A) of the ITA, introduced in 2003, outlines specific circumstances under which Indian domiciled individuals are required to obtain an ITCC. This provision has been further amended by The Finance (No. 2) Act, 2024 (FA (No. 2) 2024).

Key Points:

ITCC Requirement: Indian domiciled individuals are required to obtain an ITCC only in specific circumstances, as outlined in section 230(1A) of the ITA.

Recent Amendment: FA (No. 2) 2024 expanded the scope of the ITCC requirement to include liabilities under The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Not Applicable to All: The ITCC requirement is not applicable to all Indian citizens. It is triggered only in specific cases, such as when individuals have significant tax liabilities or are leaving the country for an extended period.

The CBDT urges taxpayers to refer to the official notification and seek clarification from tax authorities if they have any doubts regarding their specific circumstances.

CBDT Clarifies Misconceptions About Income Tax Clearance Certificate (ITCC)

The Central Board of Direct Taxes (CBDT) has clarified that recent amendments to the Income Tax Act (ITA) do not impose a blanket requirement for all Indian citizens to obtain an ITCC before leaving the country.

The amendment was intended to include liabilities under the Black Money Act within the scope of section 230(1A) of the ITA, which deals with issuance of ITCCs. This section has been in effect since 2003 and only applies to specific cases.

Specific Requirements for ITCC:

An Indian citizen is generally required to obtain an ITCC only under the following circumstances:

Serious Financial Irregularities and Pending Investigation: The individual is involved in serious financial irregularities, and their presence in India is necessary for an ongoing investigation under the ITA or Wealth Tax Act (WTA).

Significant Tax Arrears: The individual has outstanding direct tax arrears exceeding INR 1 million that have not been stayed by any authority.

It's important to note that the tax authorities can only require an ITCC after recording specific reasons and obtaining approval from the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax.

The CBDT has emphasized that the recent amendment does not change the existing framework for ITCC issuance.

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