Income Tax Clearance Certificate(ITCC): Everything You Need to Know

You don’t need an IT Clearance Certificate (ITCC) to conduct most transactions within the geographical boundaries of India. But it is still good to know about Income Tax Clearance Certificates and who might need them. 

Before the Permanent Account Number (PAN), IT Clearance Certificate was needed in cases like bidding for government projects, making real estate purchases, renewing an import/export licence, or obtaining a shipping licence.  

An income tax clearance certificate is a declaration issued by the IT department stating that the taxpayer has paid his outstanding taxes and isn’t responsible for paying more tax.

Nowadays you don’t require an IT Clearance Certificate for most deals. But according to the Income Tax Act 1961, you may still need it under some special circumstances.

In this blog, we will answer all your queries regarding Income Tax Clearance Certificates.

What is an Income Tax clearance certificate?

An income Tax clearance certificate is a document given by the state government’s revenue department stating that an individual has met all his tax obligations as of a specific date. 

This certificate is issued in form 30B by the IT department. The certificate may cover sales tax, use tax, the franchise of corporation tax, unemployment tax, etc, depending on the state’s tax regulations. This certificate is issued after receiving all pertinent documents and undertaking from the person’s employer. 

Who needs an IT clearance certificate, and when?

According to IT laws, a clearance certificate is issued to individuals not domiciled in India. Non-domiciled individuals present in the country for business, employment, or other professional purposes and derive income from India require IT clearance before returning to their home country. 

Anybody satisfying the following three criteria will require IT clearance before travelling out of India.

• Individuals who are not Indian citizens 
• Who is visiting the country for business, employment, or professional purposes 
• Has derived income from any source in India

Indian citizens don’t require Income Clearance Certificate while travelling abroad unless specifically ordered by the IT department to receive one. 

Individuals not domiciled in India can receive the IT clearance document from their employer from whom they receive their salary. The employer (or person) must declare to the IT department that the tax payable by the non-domicile Indian will be met by the employer. The IT Department will issue an IT clearance certificate on Form 30B on receiving the undertaking.  

When you are an Indian Citizen, travelling abroad (and not leaving the country permanently) IT clearance certificate is not compulsory if you have a valid PAN. But you must submit form 30C. The same applies to non-resident Indians unless they are in the country for business, employment, or professional reasons. 

An Indian citizen will require an IT clearance certificate under the following circumstances. 

• The person involved in tax irregularities and required for investigations by the IT or the Wealth-tax department.  
• The person has outstanding direct tax arrears exceeding Rs 10 lakh, not cancelled by the Direct Tax department.

Only the Chief Commissioner of Income-tax can pass the order to obtain an IT clearance certificate from Indian-domiciled individuals. 

How to receive the IT clearance certificate

In case you are wondering, the income tax clearance certificate online service is still not available. The ex-pat must submit an undertaking from the employer to the Income Tax department.

Individuals requiring an IT clearance certificate must file a proclamation with their employer or the person from whom they receive their income. While requesting an ITCC from a jurisdictional tax officer, the non-domiciled individual must submit an undertaking in form 30A from their employer stating that the employer or person from whom they receive income is responsible for paying the taxes payable by the ex-pat after their departure. 

The IT officer will issue ITCC on form 30B once they receive the undertaking. 

What happens if you don’t submit ITCC 

Two situations can arise if the departing non-docile Indian doesn’t submit ITCC.  

• The government has imposed the responsibility on the carriage (airline or ship) to satisfy that all the papers are in order, including Income Tax Clearance Certificate before allowing the passenger to travel. In case of failure, the carriage will become responsible for paying all taxes payable by the ex-pat. 
• Owners of chartered planes or ships must obtain a tax clearance certificate before leaving. If they fail to do so, the government will treat it as tax arrears and may take steps to recoup the payable amount. 

Final words 

You don’t need an Income Tax Clearance Certificate if you are an Indian citizen, barring some exceptions. However, if you are a non-domiciled employee, it is good to know about ITCC requirements to avoid tax-related troubles.