The 2024 Budget has introduced stricter rules for obtaining tax clearance certificates for those leaving India. Starting October 1, 2024, all residents must obtain a clearance certificate confirming compliance under the Black Money Act before departure.
This rule covers taxes under the Income-tax (I-T) Act and former Wealth Tax, Gift Tax, and Expenditure Tax Acts.
Key Changes and Requirements
Mandatory Clearance Certificate
According to section 230 of the Income-tax (I-T) Act, anyone living in India must secure a certificate from tax authorities before leaving the country. This certificate confirms that the individual has no unpaid taxes or has arranged to pay any outstanding amounts. This requirement applies to taxes under the I-T Act and the former Wealth Tax, Gift Tax, and Expenditure Tax Acts.
Expert Insights
Tax experts anticipate that a notification or upcoming rules will provide further clarity on these requirements. The Times of India reported that the specifics of obtaining the clearance certificate will be detailed in subsequent notifications.
Penalty Adjustments
The 2024 Budget proposes removing the ₹10 lakh penalty under sections 42 and 43 of the Black Money Act for not reporting foreign assets (other than real estate) if their total value is less than ₹20 lakh. This change is effective from October 1, 2024. The exemption also applies to incorrect or non-reporting of these foreign assets.
Reporting Foreign Assets and Income
Disclosure Obligations
Every resident who is ordinarily a resident of India must disclose all foreign assets (including investments like shares and securities) and any income from these assets when filing their Income Tax Return. Failure to report foreign income and assets or failure to submit the ITR related to them may result in a penalty of ₹10 lakh under sections 42 or 43 of the Black Money Act, regardless of the asset’s value.
Exemptions
The 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.
Government and Public Reaction
The new regulations are part of the government’s effort to tighten tax compliance and curb black money. The public is advised to stay informed about these changes and ensure compliance to avoid penalties.
Conclusion
The mandatory tax clearance certificate for leaving India is a significant step in the government’s ongoing efforts to enforce tax compliance and transparency. Residents must be vigilant in reporting their foreign assets and income to avoid penalties and ensure smooth travel plans.
