New Rules for Tax Clearance Certificates When Leaving India
The recent Budget has introduced stricter rules regarding the acquisition of clearance certificates, which are now mandatory for individuals departing from India. Effective from October 1, all residents in India must obtain a clearance certificate to confirm compliance with the Black Money Act.
Section 230 of the Income-tax (I-T) Act stipulates that individuals residing in India must acquire a certificate from the tax authorities prior to exiting the country. This certificate serves as confirmation that the individual has no outstanding taxes or has made arrangements to settle any unpaid amounts.
The requirement encompasses taxes under the Income-tax (I-T) Act, as well as those under the former Wealth Tax, Gift Tax, and Expenditure Tax Acts. Tax experts anticipate that forthcoming notifications or rules will provide further clarification on the requirements, as reported by the Times of India. Additionally, the 2024 Budget has proposed the elimination of the ₹10 lakh penalty under sections 42 and 43 of the Black Money Act for failure to report foreign assets (excluding real estate) if their aggregate value is less than ₹20 lakh. This amendment will come into effect from October 1, 2024.
Furthermore, this exemption from penal provisions also covers incorrect or non-reporting of said foreign assets, according to the Economic Times. It implies that every resident who is ordinarily a resident of India must disclose all foreign assets, including investments such as shares and securities, along with any income derived from these assets while filing their Income Tax Return. Should they fail to report foreign income and assets, or neglect to submit the related ITR, they may face a penalty of ₹10 lakh under sections 42 or 43 of the Black Money Act, irrespective of the value of the asset. However, these sections do not apply to one or more bank accounts with a total balance not exceeding ₹5 lakh at any time during the previous year.
