Central Board of Direct Taxes Archives

Income Tax Clearance Certificate Mandatory For All Indians? CBDT…

20 August 2024
by admin

The income tax return filing season has now entered the penalty phase where those who failed to file their returns by July 31 are now needed to pay fine to fill their returns. The Income Tax Department said earlier this month that timely compliance by taxpayers and tax professionals has led to a significant increase in the filing of Income-tax Returns (ITRs), setting a new record for ITRs filed by July 31, 2024. The total number of ITRs filed for the Assessment Year (AY) 2024-25 exceeded 7.28 crore, marking a 7.5% increase compared to the 6.77 crore ITRs filed by the same date for AY 2023-24.

Claims Being Made Online/Offline

Now, with crores of taxpayers filing their returns, the Income Tax department has made several changes to its website to make the user experience a smooth affair. Amid this, it was claimed that all Indians including those travelling abroad need an Income Tax Clearance Certificate. It was claimed that those opting for foreign travel must possess the Income Tax Clearance Certificate. The tax department has earlier made a statement in this regard but today, the Central Board of Direct Taxes (CBDT) came out with another statement to make the rules clear to everyone and clarify the misinformation being spread online and offline.

CBDT Fresh Statement

“There appears to be misinformation about the said amendment emanating from incorrect interpretation of the amendment. It is being erroneously reported that all Indian citizens must obtain income-tax clearance certificate (ITCC) before leaving the country. This position is factually incorrect,” said the CBDT.

CBDT issues clarification in respect of Income-tax clearance certificate (ITCC).

It is being erroneously reported that all Indian citizens must obtain ITCC before leaving the country. This position is factually incorrect.

Vide Finance (No.2) Act, 2024, Black Money… pic.twitter.com/tadFVQr99F
— Income Tax India (@IncomeTaxIndia) August 20, 2024

What Rules Say

Section 230 (1A) of the Income-tax Act, 1961(the ‘Act’) relates to obtaining of a tax clearance certificate, in certain circumstances, by persons domiciled in India. The said provision, as it stands, came on the statute through the Finance Act, 2003 w.e.f. 1.6.2003. The Finance (No.2) Act, 2024 has made only an amendment in Section 230(1A) of the Act, vide which, reference of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the ‘Black Money Act’) has been inserted in the said Section. This insertion has been made to also cover the liabilities under the Black Money Act in the same manner as the liabilities under the Income-tax Act,1961 and other Acts dealing with direct taxes for the purpose of Section 230(1A) of the Income-tax Act,1961.

As per section 230 of the Act, every person is not required to obtain a tax clearance certificate. Only certain persons, in respect of whom circumstances exist which make it necessary to obtain a tax clearance certificate, are required to obtain the said certificate. This position has been in the statute since 2003 and remains unchanged even with the amendments vide Finance (No. 2) Act, 2024.

“The CBDT, vide its Instruction No. 1/2004, dated 05.02.2004, has specified that the tax clearance certificate under Section 230(1A) of the Act, may be required to be obtained by persons domiciled in India only in the following circumstances: (a) where the person is involved in serious financial irregularities and his presence is necessary in the investigation of cases under the Income-tax Act or the Wealth-tax Act and it is likely that a tax demand will be raised against him, or, (b) where the person has direct tax arrears exceeding Rs 10 lakh outstanding against him which have not been stayed by any authority,” said the CBDT.

How To Get Tax Clearance Certificate?

According to the CBDT, a person can be asked to obtain a tax clearance certificate only after recording the reasons for the same and after getting approval from the Principal Chief Commissioner of Income-tax or Chief Commissioner of income tax. Those persons mandated to require the certificate can obtain the same from the Income Tax Department by making a written request online or offline.

Science & Environment

Sent above a certain amount in outward foreign remittances?…

13 August 2024
by admin

The Central Board of Direct Taxes (CBDT) has initiated a thorough examination and verification process for outward foreign remittances exceeding Rs 6 lakh to identify any discrepancies in the data and potential tax evasion.
This action was taken after the discovery of cases where foreign remittances and expenditures were inconsistent with the income declared by individuals, as well as shortcomings in the collection of tax at source (TCS), sources familiar with the matter told ET.
The board has instructed its field formations to commence the verification process and scrutiny of Form 15CC, which is a quarterly disclosure statement of outward remittances submitted by authorized dealers to the income-tax department. The data from Form 15CC has been collected and segregated since 2016, and it will be available for analysis starting this year.
The board will create a list of high-risk cases based on the scrutiny of data from the 2020-21 financial year onwards. It has instructed the field formations to develop a detailed standard operating procedure (SOP) for detecting high-risk cases and to submit a list of such cases by September 30. The government has set a deadline of December 31 for sending initial notices to those identified as having undeclared income.

Risky remittance

“A comprehensive review was recommended last year… This will (soon) be made available to field formations for the first time,” a senior official told ET.
The initiative will enable the government to identify cases where remittances were sent but not reported by the taxpayer in their filings, the official added.
“The whole exercise will curb tax evasion and ensure that legitimate remittances are facilitated while preventing abuse of relaxations in foreign remittance reporting.”
An official has revealed irregularities in foreign remittances, citing a case where an individual with a declared annual income of Rs 5 lakh sent Rs 15 lakh abroad over the past three years, using multiple dealers to avoid mandatory Tax Collected at Source (TCS) and evade taxes.
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The government imposes a 20% TCS on foreign remittances exceeding Rs 7 lakh under the Liberalised Remittance Scheme (LRS), with certain exceptions for medical and education expenses. Form 15CC allows remitters to certify that their remittance is not taxable, exempting them from providing further details. This applies to payments by importers, companies to their subsidiaries, or loans to non-residents.
However, officials have identified potential misuse of this relaxation. “Monitoring these payments where exemption is claimed is crucial to prevent abuse of these relaxations,” said the official quoted above.
The CBDT has instructed banks to report total forex spends as a separate category, in addition to total credit card spends, even when not collecting TCS. This data is included in the annual income statement used for income tax assessment. The government increased TCS on foreign remittances under LRS from 5% to 20%, effective October 1, 2023.
The 2023 budget initially brought international credit card payments under the LRS and implemented TCS on such transactions. However, this decision was later reversed due to widespread criticism.

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