Under Section 230 of the Act, not every person is required to obtain a Income tax clearance certificate (ITCC) prior to departing the country. Only specific individuals, particularly those involved in serious financial irregularities or those with direct tax arrears exceeding Rs. 10 lakh that have not been stayed by any authority, must obtain this certificate. This rule has been in place since 2003 and continues to apply even after the amendments made by the Finance (No. 2) Act, 2024.
The CBDT, through Instruction No. 1/2004, dated 05.02.2004, clarified that the tax clearance certificate under Section 230(1A) is only necessary in the following cases: (a) when a person’s presence is needed for investigations related to serious financial irregularities, or (b) when there are significant tax arrears pending against them. Moreover, before requiring a person to obtain this certificate, reasons must be documented, and approval must be obtained from the Principal Chief Commissioner or Chief Commissioner of Income-tax.
In summary, the requirement to obtain a tax clearance certificate under Section 230(1A) of the Act is limited to rare situations involving either serious financial misconduct or substantial unpaid taxes.