The recent Union Budget 2024-25 government introduced a new amendment that mandates individuals domiciled in India to clear their tax dues and obtain clearance certificates before leaving the country.
This amendment, under the Black Money Act, will take effect from October 1, 2024, wherein Clause 71 of the Bill seeks to amend section 230 of the Income-tax Act relating to tax clearance certificates. The clause states that “sub-section (1A) of the said section, provides that no person who is domiciled in India, shall leave India, unless he obtains a certificate from the income-tax authorities stating that he has no liabilities under the Income-tax Act, or the Wealth-tax Act, 1957, or the Gift-tax Act, 1958, or the Expenditure-tax Act, 1987”.
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Further, such a person has the option to make “satisfactory arrangements for the payment of all or any of such taxes which are or may become payable”.
According to Section 230 of the Income-tax (I-T) Act, anyone residing in India must obtain a certificate from the tax authorities before leaving the country. This certificate confirms that the individual has no unpaid taxes or has made arrangements to settle any outstanding amounts.
Currently, such provisions exist, but this clearance certificate is only required to be obtained where circumstances exist which, in the opinion of an income-tax authority, render it necessary for such a person to obtain the same. So tax experts believe that a notification or the subsequent rules will provide a clearer explanation of the new requirements.
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The Bill adds that it is proposed to “amend the provision to the said sub-section by inserting the reference of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 therein, to impose the liabilities under the said Act to obtain the certificate relating to no liabilities.”
The recent change in rules introduced in the Budget does not affect Indian individuals who are renouncing their citizenship in favour of obtaining foreign citizenship. Because, according to Indian regulations, individuals acquiring a foreign nationality must relinquish their Indian passport and acquire a renunciation certificate from the Indian authorities. The renunciation process includes a background investigation of the applicant to address any unresolved legal matters or outstanding tax obligations.
Other Changes Related To Litigation
The recent Budget also proposes to eliminate the Rs 10 lakh penalty for failure to report foreign assets when the total value is below Rs 20 lakh. The amendment aims to reduce the financial burden on taxpayers who unintentionally overlooked reporting small-scale overseas assets.
Under the current Black Money Act, the standard penalty of Rs 10 lakh for not disclosing any foreign asset, regardless of its worth, has been a significant concern for taxpayers.
Finance Minister Nirmala Sitharaman had also proposed measures to reduce litigation, including decriminalising delay for TDS payment and simplifying provisions for reopening and reassessment in favour of taxpayers. Also, immunity from penalty and prosecution is proposed for benamidars on full disclosure.
