Many people on the internet recently expressed confusion after some viral claims suggested that an income tax clearance certificate (ITCC) is mandatory for all travellers going abroad. However, the government on Saturday debunked those claims and issued a clarification.
In a social media post, the Press Information Bureau (PIB) clarified that under Section 230 of the Income Tax Act, tax clearance certificates are not mandatory for everyone. They are only required for specific individuals under certain legal circumstances. However, this clarification was applicable only to Indian citizens living in the country.
From the perspective of a non-resident Indian (NRI), the rules are different. Under the Income Tax Act, 2025, an ITCC is required for individuals with significant or unresolved tax liabilities. In most cases, NRIs are unlikely to be affected, though those with pending dues or ongoing tax proceedings in India may still be required to obtain clearance before departure.
“Section 420 of the IT Act, 2025, requires tax clearance if you have unresolved liabilities or investigations before leaving India,” said CA Nishant Shanker, an independent tax strategy expert and former senior manager of tax at EY.
Who does it apply to?
As per Section 420(1), the requirement to obtain an ITCC primarily applies to certain NRIs. They include:
- NRIs who are not domiciled in India.
- Those who have come to India for business, profession, or employment.
- Those who have income sourced in India.
“The proposed new sub-section (1) of the said section requires a person who is not domiciled in India and who has come to India in connection with business, profession or employment and who has income derived from any source in India to furnish to such authority as may be prescribed, an undertaking in the prescribed form, to the effect that the tax payable by such person shall be paid by the employer or the person from whom income is received,” according to the Income Tax Department.
According to Shanker, it applies mainly to those with substantial pending tax issues, and high-net-worth individuals (HNIs) are generally scrutinised more. But it depends on the tax status and not just the income.
Tourists exempt from the mandate
“They (select NRIs) must furnish an undertaking from their employer or income source guaranteeing tax payment, after which an NOC is issued. Tourists are naturally exempt,” he said.
For Indian residents, a certificate is generally not needed unless specifically directed. This may happen if they are involved in serious financial irregularities or have outstanding tax demands exceeding ₹10 lakh that aren’t stayed, Shanker explained, adding that departure can be restricted only after recording reasons and getting prior approval from senior officials. Domiciled persons must furnish PAN and travel details upon departure.
What happens if you leave without seeking tax clearance?
If you leave the country without seeking tax clearance, then it is considered a default. Serious defaults include unpaid demands, undisclosed income or tax evasion, exceeding specific thresholds.
Leaving without obtaining tax clearance can result in penalties, travel restrictions or even legal action, Shanker said. “The Immigration will check clearance status, where you need to show your No Objection Certificate if required.”
Further, once treated as an assessee in default, their liability extends beyond the principal tax to include “interest” for the period of delay, typically computed on a monthly basis until recovery, the expert said. “While the provision is largely a civil recovery mechanism, prosecution may arise in cases of wilful default or collusion, exposing the operator to potential penal consequences in addition to financial liability.”
How to apply for tax clearance?
To seek tax clearance, a non-resident individual should apply online via the tax portal. They have to submit documents, clear dues, and get the certificate electronically. Typically, one is required to submit the following documents:
- Latest tax returns
- Assessment orders
- Proof of tax payments
- Any communication with the tax department regarding pending issues
“If directed, you’d need Form 158, PAN, and passport copies, travel details and evidence of tax payments. Non-residents with Indian income typically show an undertaking from their employer,” Shanker said.
