Tax Alert - Clarification on ITCC - August 2024

Background:

• Finance Minister Nirmala Sitharaman had announced a key amendment in the Union Budget 2024 aimed at individuals planning to relocate from India.
• Under the new law, individuals domiciled in India are required to clear all pending tax dues and obtain a ‘Income-tax Clearing Certificate’ (ITCC) before departing the country. This amendment vide the Finance Act (No. 2), 2024 also included a reference to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, under Section 230(1A) of the Income-tax Act.
• This means that liabilities under the Black Money Act are now treated in the same manner as liabilities under the Income-tax Act for the purpose of obtaining an ITCC.
• However, there was confusion and reports in the media mainly on account of interpretation of Hon’ble Finance Minister’s speech whereby it was being reported that all the individuals leaving India shall be mandatorily required to
  obtain this ITCC.

Clarification issued on 20-Aug-2024:

• Central Board of Direct Taxes (CBDT) has now issued a press release on 20-Aug2024 to clarify that contrary to some incorrect reports, not all Indian citizens domiciled in India are required to obtain an ITCC before leaving the country. The requirement applies only to specific cases:
  • If a person is involved in serious financial irregularities and is under investigation where a tax demand is likely to be raised.
  • If a person has outstanding direct tax arrears exceeding Rs. 10 lakh, which have not been stayed by any authority.
• The decision to require an ITCC must be supported by recorded reasons and approved by the Principal Chief Commissioner or Chief Commissioner of Income-tax.
• This clarification aims to dispel misinformation and reassure taxpayers that the ITCC requirement remains limited to rare and specific circumstances, unchanged since 2003.

SBC Comments:

ITCC is to be obtained from the concerned Income tax authority by filing application in in Form No. 31 by the individuals domiciled in India at the time of departure if:

• The concerned Income tax authority (i.e., Assessing officer) is of the opinion that there are circumstances which necessitates such person to obtain such certificate.
• The Income tax authority records the reasons and obtain approvals as mentioned.

This certificate shall be issued only if there are liabilities under the following Acts:

• Income-tax Act, 1961
• Wealth-tax Act, 1957 (27 of 1957)
• Gift-tax Act, 1958 (18 of 1958), or
• Expenditure-tax Act, 1987 (35 of 1987) or

Post the amendment vide the Finance Act (No.2) 2024, now the liabilities under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 shall be additionally considered while issuing such certificate.

It is now clear from the CBDT clarification that only in rare cases (serious financial irregularities or tax arrears are moas mentioned), ITCC shall be required. The tax authorities in such cases shall issue ITCC after perusing the liabilities under above regulations or after perusing that satisfactory arrangements have been made for the payment of all or any of such taxes/dues which are or may become payable by that person.

Where can SBC help?

• Representation before tax authorities in relation to obtaining of ITCC
• Advise on the applicability of ITCC and perusal of the specific facts applicable.
• Advise and assist in mitigation of liabilities, if any, under any of the above laws mentioned.