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Tax Clearance Certificate


Tax Clearance Certificate

A tax clearance certificate is a document issued by the tax authorities stating that the taxpayer has cleared all his tax dues or is not liable for payment of tax. This article is an account of the need for a tax clearance certificate, for varying purposes.

Persons not Domiciled in India

A person who is not domiciled in India who has come to India for the purpose of business, profession or employment, and who holds income derived from any source in India must obtain a tax clearance certificate before leaving the country. For a person not domiciled in India, the certificate can be obtained through the employer or through whom such person is in receipt of the income.

Normally, the employer or person through whom the person is in receipt of income must state to the tax authorities that the tax payable by such person who is not domiciled in India, will be met by the employer or by the person from whom income was received. It should further state that the concerned authority shall, on receipt of the undertaking, immediately issue a no-objection certificate in Form No. 30B.

On receiving this undertaking, the tax department will issue the necessary certificate. The format of Form 30B is given below for reference:

Form 30B

Persons Domiciled in India

Persons who are domiciled in India are only required to furnish permanent account number, the purpose of visit outside India and estimated period of stay outside India in case of travel abroad. A tax clearance certificate is not mandatory for most Indian Nationals and Residents.

However, if the income tax authorities decide due to various circumstances that a person must obtain a tax clearance certificate for travel abroad, such an order can be passed. This order for passing an order can be obtained only after taking approval from the Chief Commissioner of Income-tax.

Finally, a tax clearance certificate may be required to be obtained by persons, domiciled in India in the following circumstances :

  • Where the person is involved in serious financial irregularities and his presence is necessary in the investigation of cases under the Income-tax Act or the Wealth-tax Act and it is likely that a tax demand will be raised against him, or
  • Where the person has direct tax arrears exceeding Rs. 10 lakh outstanding against him which have not been stayed by any authority.

In case a person domiciled in India requiring tax clearance certificate is to travel abroad, the Assessing Officer, after satisfying himself that the departure of such persons from India will prejudicially affect the interest of revenue, can issue the relevant certificate.

Commercial Contractors

Income Tax Clearance Certificate is no longer required to be furnished by any person applying for tender or entering into commercial contracts. Also, tax clearance certificates are not required for registration or renewal of registration of contractors, renewal of import/export licences, renewal of post licences and renewal of shipping licences. However, all taxpayers are required to quote their Permanent Account Number in their tender or other relevant documents.