Tax clearance certificate — More rigid procedure

Q: What is the proposed dispensation regarding tax clearance certificates for persons going abroad?

A: Sec. 230 under the present law requires tax clearance certificate for every person domiciled in India in case of his departure for employment or as an emigrant or there is a direction from the assessing officer to any assessee not to leave India without such certificate. Non-domiciles were required to obtain a tax clearance certificate, except for minors, and diplomats and those whose stay in India did not exceed 120 days. The carrier becomes responsible for any tax that might become liable against the person, if he facilitates any such person to leave India without such certificate. This provision is proposed to be substituted.

The Finance Minister's speech claims that the proposal is to restrict the need for such certificates only to expatriates coming to India in connection with business, profession or employment subject to guarantee from the employer, with those domiciled in India requiring only Permanent Account Number (PAN) and declaration of intended period of stay abroad. The substituted section would accept from every person domiciled in India a certificate in lieu of PAN, if he is not required to get such number. The power to stop those domiciled in India, if the assessing officer feels it necessary, will continue in the new section. The proposed section requires a person not domiciled in India, who comes to India on business, profession or employment or who may have any income in India, other than those, who come on tourist visa for short period or for purpose unconnected with business, profession or employment, will now require tax clearance certificate, as before, subject to an undertaking and indemnity "from his employer or through whom such person is in receipt of income".

Tax clearance certificate is now made more difficult for expatriates other than those with tourist visa or on Government duty to leave India once they come here, since it will not be easy to conform to the requirement of finding not only a certifier but also an indemnifier of undetermined and uncertain tax, presumably for an indefinite period.

Apparently, the belief that Finance Minister had, when he assured the Parliament as one of the principal proposals in the basket of tax reform is "the abolition of tax clearance certificate needed by a person leaving India........" is based on the mistaken impression that the substituted section is easing the procedure. He has, apparently, assumed that the permission to leave India on guarantee is a relaxation of existing law, which it is not. Unless liability to tax is determined before a non-resident leaves India, it may never be determined, with guarantee not being of any avail, so that the new procedure is not good enough even for revenue, besides imposing a difficult and indiscriminate burden on all those who visit India.

S. Rajaratnam

(To be continued)

Recommended for you