Tax clearance certificate
[Section-420 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 420(1) of Income Tax Act 2025
420(1) Subject to such exceptions as the Central Government may, by notification, specify in this behalf, no person,—
- 420(1)(a) who is not domiciled in India;
- 420(1)(b) who has come to India in connection with business, profession or employment; and
- 420(1)(c) who has income derived from any source in India,
shall leave the territory of India by land, sea or air unless he furnishes to such authority as prescribed—
- (i) an undertaking in the prescribed form from his employer; or
- (ii) through whom such person is in receipt of the income,
to the effect that tax payable by such person who is not domiciled in India shall be paid by the employer referred to in clause (i) or the person referred to in clause (ii), and the prescribed authority shall, on receipt of the undertaking, immediately give to such person a no objection certificate, for leaving India.
Section 420(2) of Income Tax Act 2025
420(2) Nothing contained in sub-section (1) shall apply to a person who is not domiciled in India but visits India as a foreign tourist or for any other purpose not connected with business, profession or employment.
Section 420(3) of Income Tax Act 2025
420(3) Subject to such exceptions as the Central Government may, by notification, specify in this behalf, every person, who is domiciled in India at the time of his departure from India, shall furnish, in the prescribed form to the income-tax authority or such other authority as prescribed—
- 420(3)(a) the Permanent Account Number allotted to him under section 262;
- 420(3)(b) the purpose of his visit outside India; and
- 420(3)(c) the estimated period of his stay outside India.
Section 420(4) of Income Tax Act 2025
420(4) Where no such Permanent Account Number has been allotted to him, or his total income is not chargeable to income-tax, or he is not required to obtain a Permanent Account Number under this Act, such person shall furnish a certificate in such form, as prescribed.
Section 420(5) of Income Tax Act 2025
420(5) No person—
- 420(5)(a) who is domiciled in India at the time of his departure; and
- 420(5)(b) in respect of whom circumstances exist which, in the opinion of an income-tax authority render it necessary for such person to obtain a certificate under this section,
shall leave the territory of India by land, sea or air unless he obtains a certificate from the income-tax authority stating that he has no liability under this Act, or the Wealth-tax Act, 1957 or the Gift-tax Act, 1958 or the Expenditure-tax Act, 1987 or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, or that satisfactory arrangements have been made for the payment of all or any of such taxes which are or may become payable by that person.
Section 420(6) of Income Tax Act 2025
420(6) No income-tax authority shall make it necessary for any person who is domiciled in India to obtain a certificate under this section unless—
- 420(6)(a) he records the reasons therefor; and
- 420(6)(b) obtains the prior approval of Principal Chief Commissioner or Chief Commissioner.
Section 420(7) of Income Tax Act 2025
420(7) If the owner or charterer of any ship or aircraft carrying persons from any place in the territory of India to any place outside India allows any person to whom sub-section (1) or (5) applies to travel by such ship or aircraft without first satisfying himself that such person is in possession of a certificate as required by those sub-sections, he shall be personally liable to pay the whole or any part of the amount of tax, if any, payable by such person as the Assessing Officer may, having regard to the circumstances of the case, determine.
Section 420(8) of Income Tax Act 2025
420(8) In respect of any sum payable by the owner or charterer of any ship or aircraft under sub-section (7),—
- 420(8)(a) the owner or charterer, shall be deemed to be an assessee in default for such sum; and
- 420(8)(b) such sum shall be recoverable from him in the manner provided in this Part as if it were an arrear of tax.
Section 420(9) of Income Tax Act 2025
420(9) The Board may make rules for regulating any matter necessary for, or incidental to, the purpose of carrying out the provisions of this section.
Section 420(10) of Income Tax Act 2025
420(10) In this section, “owner” and “charterer” include any representative, agent or employee empowered by the owner or charterer to allow persons to travel by the ship or aircraft.
FAQs on Section 420 of Income Tax Act 2025
Who is required to obtain a tax clearance certificate under Section 420(1) of the Income Tax Act, 2025?
A person who is not domiciled in India, has come to India in connection with business, profession or employment, and derives income from any source in India must obtain a no objection certificate before leaving India. This requires an undertaking from their employer or the person paying the income, stating that taxes will be paid.
Is a foreign tourist required to obtain a tax clearance certificate before leaving India?
No, as per Section 420(2), foreign tourists or persons not domiciled in India who visit for purposes other than business, profession or employment are not required to obtain a certificate.
What information must a person domiciled in India provide before leaving the country?
Under Section 420(3), a person domiciled in India must furnish their Permanent Account Number, the purpose of their travel outside India, and the estimated duration of stay abroad in the prescribed form.
What if the person domiciled in India does not have a Permanent Account Number?
As per Section 420(4), if the person has not been allotted a PAN, has no taxable income, or is not required to obtain a PAN, they must furnish a prescribed certificate instead.
In what circumstances must a domiciled person obtain a tax clearance certificate under Section 420(5)?
A person domiciled in India must obtain a tax clearance certificate if, in the opinion of an income-tax authority, circumstances exist that make it necessary. This applies particularly when there’s a possibility of outstanding liabilities under various tax laws.
Can the income-tax authority require a certificate arbitrarily?
No. As per Section 420(6), the income-tax authority must record reasons and obtain prior approval from the Principal Chief Commissioner or Chief Commissioner before requiring such a certificate.
What happens if a ship or aircraft operator allows a person to leave India without the required certificate?
Under Section 420(7), if a ship or aircraft operator allows a person covered under sub-sections (1) or (5) to leave India without ensuring they have the required certificate, the operator is personally liable for the unpaid taxes of that person.
How is the liability of the ship or aircraft operator enforced?
According to Section 420(8), such an operator is treated as an assessee in default, and the tax due is recoverable from them as if it were an arrear of tax.
Who is considered an “owner” or “charterer” for the purposes of Section 420?
As per Section 420(10), the terms “owner” and “charterer” include any representative, agent, or employee authorized to permit travel by ship or aircraft.
Who makes the rules for implementing Section 420?
Section 420(9) empowers the Board to make rules for matters necessary or incidental to carrying out the provisions of this section.
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