Everything About Income Tax Clearance Certificate

An income tax clearance certificate is a declaration from the department that you have cleared all your dues. Normally, it is needed by people who are currently not domiciled in India and have generated income from any Indian source. In such a case, you will have to furnish your PAN details to the Income Tax Department (ITD) so that your financial transactions are properly audited. Notably, with effect from October 2024, the Central Board for Direct Taxes (CBDT) (under section 230) has mandated that Indian nationals will not need an ITCC before moving to a different country.

• An ITCC is required by people not domiciled in India to declare their tax obligations corresponding to the revenue they have generated within India.
• You have to fill out Form 30A to request an ITCC, and the acceptance of the same will be communicated to you via Form 30B.
• After October 1, 2024, it is not mandatory to secure an ITCC for individuals domiciled in India before leaving the country.

Let us look at the reasons why income tax clearance is so important.

• An ITCC makes sure that all individuals under its purview are compliant with the prevailing income tax laws of the land.
• This income tax clearance is the final declaration that the examined individuals do not owe the Indian state any tax.
• The ITCC is provided under Form 30B if the ITD is satisfied with the details furnished through the submitted documents.

Obtaining an ITCC is a systematic process and involves the following steps:

• You need to file a request with your employer to provide you with your salary details that clearly state all the components. This document will help understand the tax structure that your salary will attract.
• As a non-resident Indian, you may obtain Form 30A, fill out the required details, and submit the form to the appropriate tax officer.
• The form must have a declaration from your employer that if any tax is later found outstanding, they will be responsible for compensating such amounts on your behalf.
• If everything goes fine, you will receive an accepted ITCC with an attached Form 30B that recognises the provisional nature of the clearance subject to the previous point.

The service to apply and obtain the Income Tax Clearance Certificate (ITCC) is not available online. The expatriate must submit Form 30A along with the necessary documents in person.

Once the income tax officer reviews the documents and is satisfied with them, they will issue the ITCC in Form 30B. However, this certificate is valid only for a specific period, and the expiration date will be mentioned on the certificate itself. So, the expatriate must be aware of the validity period to ensure it’s used within the given timeframe.

These are the principal uses of the ITCC, which you might obtain if required.

Loan applications

Having an income tax clearance certificate would convey to financial institutions that you have a proven track record of being financially stable. This clearance certificate helps banks gain confidence about sanctioning loans to you.

Tenders

In case you bid for government tenders, it is desirable to understand your financial bearings and whether you are eligible to bid.

Business transactions

Business transactions are bound to be more fruitful if you have income tax clearance. To your business collaborators, ITCC holds the meaning that you have been thorough with the tax rules and regulations and are maintaining a good standing relationship with the government.

Litigation

It would not be far-fetched to be on the safer side in case you face any legal dispute regarding a business transaction or a property you have invested in. Having an ITCC will help you take a definitive step towards cementing your favourable position as a responsible and consistent taxpayer.

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