Government clarified Tax Clearance Certificate, approval is necessary for those with tax arrears

According to Section 230 of the Income Tax Act, 1961, it is not necessary for every person to obtain a tax clearance certificate. It is necessary only for some persons.

The Income Tax Department had stated in a 2004 notification that tax clearance certificates would have to be given to persons residing in India only under certain circumstances.

These include a person who is involved in serious financial irregularities. His presence is required 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 made against him, or where the person has direct tax dues of more than Rs 10 lakh, which has not been withheld by any authority.

The Income Tax Department said that a person will be given a tax clearance certificate only after recording the reasons and obtaining approval from the Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax.

Such a certificate is required to be issued by the Income Tax Authority. This certificate will make it clear that such a person has no liability under the Income Tax Act, the Wealth Tax Act, 1957, the Gift-Tax Act, 1958, or the Expenditure-Tax Act, 1987.