In a bid to have better tax administration in place and to avoid tax evasion, Finance Minister Nirmala Sitharaman introduced the concept of a tax clearance certificate in the Union Budget 2024. She said, "Tax Clearance Certificate: It is proposed to include reference of Black Money Act, 2015 for the purposes of obtaining a tax clearance certificate. "
It means that starting October 1, residents of India will need a clearance certificate confirming compliance with the Black Money Act to leave India.
As per Section 230 of the Income-tax (I-T) Act, any individual residing in India must obtain a certificate from tax authorities before departure.
However, experts feel that the measure is more administrative in nature and there were such requirements that existed.
Amit Maheshwari, tax partner, AKM Global, a tax consultancy firm, stated that "Effective October 1, 2024, the "Black Money Act" will also be considered when determining if a resident needs a tax clearance certificate before leaving India. In practical terms, this means that if a resident is leaving India and has any undisclosed foreign income or assets, they may need to obtain a tax clearance certificate before leaving, even if they have no outstanding taxes under the other acts such as the Income-tax act’ 1961, Wealth Tax Act, etc. This will likely strengthen India's efforts to combat tax evasion and black money, particularly in relation to foreign income and assets."
Aarti Raote, Partner, Deloitte India said, "A tax clearance certificate is required by law for a person repatriating from India for employment or settling overseas, i.e., migrating overseas permanently. Now, the requirement is for a confirmation of the Black Money Act as well to ensure that the resident taxpayer has accounted for all income liable to tax in India and there is no income escaping tax in India. The new section requires the taxpayer to confirm that no dues are pending or that satisfactory arrangements have been made for the payment of taxes."
"Section 230 which has a requirement to obtain a tax clearance certificate has always been in statute. This applies only to people who are not domiciled in India and those who have come to India to earn income. It never applied to resident Indians leaving India.
The law also clarifies that it doesn't apply to foreign residents who come to India on vacation or tourism. This income tax clearance certificate is for instance needed by an expatriate who has come to work in India for a year or two.
That certificate confirms that there were no dues under the Income Tax Act, Wealth Tax, Gift Act, etc. Now they have added that he or she needs to obtain a clearance that there are no dues under the Black Money Act. It is not a very significant change," Ajay Rotti, Founder and CEO of Tax Compass, a tax consultancy firm.
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