Income tax Act requires that before leaving India a person should pay all taxes on the income earned in India by means of business, Profession, and employment.
Section 230 of the Income Tax Act specifically requires the person to get a tax clearance certificate from the income tax officer before leaving India. Earlier Section 230 required the person to get a tax clearance certificate in respect of registration or renewal of registration of contracts, renewal of import-export licenses, renewal of post licenses, renewal of shipping licenses. The central board of direct tax (CBDT) has done away with tax clearance certificates for such persons by issuing circular no 2/2004 dated February 10, 2004. However, such a person should quote the permanent account number (PAN) in their tender and other relevant documents.
A tax clearance certificate is required to be obtained when a person is not domiciled in India and has come to India in connection with business, profession, or employment and has earned income from any source in India. No person is allowed to leave India unless he furnishes an undertaking to the prescribed authority to the effect that tax payable by such person is to be paid by either an employer or the person from whom the income is received.
1. WHEN A PERSON IS NOT DOMICILED IN INDIA [SECTION 230(1)] –
No objection certificate (NOC): Where a person satisfies the following conditions needs to furnish the undertaking in Form No 30A from his employer or through whom income is received.
- a person is not domiciled in India;
- he has come to India, in connection with business, profession or employment;
- he has earned income from any source in India.
When the prescribed authority is satisfied with the undertaking, then it shall give immediately a certificate in Form 30B.
A person is not required to obtain NOC/Tax clearance certificate where he is not domiciled in India but visits India as a foreign tourist or for any other purpose other than business, profession, or employment.
When there is no dispute that the tax clearance certificate under section 230(1) is required with regard to the taxes outstanding as of the date of the departure or at the most, the tax that may be outstanding with reference to the date of the departure, then how satisfactory arrangements can go beyond or a guarantee may be required beyond that period of departure. The person giving guarantee u/s. 230(1) can be held liable only for taxes outstanding on the date of departure and not for liabilities arising long thereafter. [(Laura Hamilton vs. S.K.P. Menon, TRO (184 ITR 252)]
2. WHEN THE PERSON IS DOMICILED IN INDIA:
If a person is domiciled in India, he can submit a self-declaration and is not required to obtain a tax clearance certificate from the income tax authority.
2.1 Self-declaration: Self-declaration should satisfy the following conditions:
- It should be in Form 30C;
- It should be submitted to the Income tax authority;
- It should contain the PAN number;
- It should disclose the estimated period of stay outside India; and
- It should disclose the purpose of the visit outside India.
2.2 Tax clearance certificate from income tax authority [Section 230(1A)]-
The income tax act requires a person to get a Tax clearance certificate mandatorily in the following two cases, without which a person cannot leave India:
- Involvement in serious financial irregularities and his/her presence is necessary for the investigation of cases under the law and it is likely that a tax demand would get materialized, or
- Such a person has direct tax arrears of more than ₹ 10 lakhs which have not been stayed by any authority.
The certificate under this clause is obtained in Form 33 from the income tax authority, and it contains information about a person who has non-liability of income tax, wealth tax, gift tax, or expenditure act, or who has made satisfactory arrangements for payment of such taxes.
3. RESPONSIBILITY OF OWNER OR CHARTERER OF ANY SHIP OR AIRCRAFT [SECTION 230(2)]:
If the owner or charterer of any ship or aircraft carrying persons from any place in the territory of India to any place outside India allows any person to travel by such ship or aircraft without first satisfying himself that such person is in possession of a certificate as required by that sub-section, he shall be personally liable to pay the whole or any part of the amount of tax, if any, payable by such person as the Assessing Officer may having regard to the circumstances of the case, determine.
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