Income-Tax Clearance Certificate (ITCC): What You Should Know About the Clarification Issued by CBDT

To clear up any doubts regarding the Income-Tax Clearance Certificate's (ITCC) applicability, the Central Board of Direct Taxes (CBDT) recently released a clarification. We shall examine the specifics of the clarification and the situations in which obtaining an ITCC is necessary in this blog post.

Who Requires an ITCC?

It has been stated by the CBDT that not everyone needs to have an ITCC. In actuality, only a specific set of individuals—regarding whom specific circumstances exist that necessitate obtaining a tax clearance certificate—are obliged to receive said certificate. Despite the changes made by the Finance (No. 2) Act of 2024, this position has been part of the statute since 2003 and has not changed.

Situations Needing an ITCC

According to the CBDT, an ITCC may only be necessary for individuals residing in India under the following conditions:

• Financial irregularities: If an individual is involved in significant financial irregularities and his presence is required for the purpose of investigating cases under the Wealth-Tax Act or the Income-Tax Act, it is probable that he will face a tax demand.
• Direct Tax Arrears: When an individual owes more than Rs. 10 lakh in unpaid direct tax arrears that have not been halted by a court order.

The Process for Getting an ITCC

Only after noting the reasons for the request and receiving approval from the Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax may someone be asked to obtain an ITCC.

Important Lessons Learned

The clarification from the CBDT highlights that Indian citizens are only obligated to use the ITCC under Section 230(1A) of the Act in exceedingly exceptional situations, like:

• When a person engages in substantial financial wrongdoing.
• When a tax demand that is more than Rs. 10 lakh is still outstanding and hasn't been halted by a court.

It's important to remember that the Ministry of Finance has clarified the circumstances under which Indian nationals traveling abroad are exempt from needing an ITCC and under what circumstances they do. This correction addresses erroneous information that was circulating, according to which all Indian citizens must obtain an ITCC before leaving the nation.

In Summary

The CBDT's explanation offers much-needed clarity on the applicability of the ITCC, and it is critical that people are aware of the situations in which they might be asked to get one.

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