Amid widespread social media outrage triggered by the Budget proposal requiring tax clearance certificates for foreign travel, the government clarified on Sunday that the proposed amendment is not intended for all Indian residents. The Finance Ministry emphasized that only individuals accused of financial irregularities or those with substantial tax arrears would need such clearance.
In the Finance Bill, 2024, the ministry proposed adding the Black Money Act, 2015, to the list of Acts under which individuals must clear their liabilities to obtain a tax clearance certificate. This clarification aims to dispel misconceptions and reassure the general public that the new rules do not apply to everyone.
“The proposed amendment does not require all residents to obtain a tax clearance certificate,” the ministry stated. According to Section 230 of the Income Tax Act, only specific individuals need this document. These include those involved in serious financial irregularities, individuals whose presence is necessary for investigations under the Income Tax Act or the Wealth Tax Act, and those with direct tax arrears exceeding ₹10 lakh that have not been stayed by any authority.
The Income Tax department, in a 2004 notification, had specified that the tax clearance certificate may be required only in certain circumstances. The requirement applies to individuals with significant financial irregularities and unresolved tax arrears, ensuring that only those cases where there is a risk of financial misconduct are targeted.
A senior official from the Income Tax department elaborated, stating that a tax clearance certificate can only be requested after recording specific reasons and obtaining approval from the Principal Chief Commissioner of Income Tax or the Chief Commissioner of Income Tax. This process ensures that the measure is not misused and is applied only when necessary.
Once these individuals clear their liabilities, the income tax authorities will issue a certificate stating that the person has no outstanding tax obligations, thereby allowing them to travel abroad without hindrance.
The Finance Ministry’s clarification aims to address public concerns and highlight the targeted nature of the proposal. By focusing on individuals with significant financial irregularities, the government seeks to ensure compliance and curb tax evasion without imposing unnecessary burdens on the general public.
As the proposal moves forward, the government is expected to provide further details and guidelines to ensure a smooth implementation and to maintain transparency in its application.
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