Tax clearance certificate in the case of a foreign employee not domiciled in India-Simplification of procedure-Regarding - Income Tax - 546/1989

Tax clearance certificate in the case of a foreign employee not domiciled in India-Simplification of procedure-Regarding Circular No. 546 Dated 4/10/1989 Under the provisions of section 230 of the Income-tax Act, 1961, it has been prescribed, inter alia, that a person who is not domiciled in India cannot leave the territory of India by land, sea or air unless he obtains a certificate from the "Competent Authority" that he has no liability under various Acts mentioned therein, 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. 2. One of the methods of ensuring that satisfactory arrangements have been made for the payment of such taxes is by way of obtaining guarantee from the employer of the person leaving the country that any tax found due will be paid by the employer (guarantor). Under the existing procedure the guarantee tendered by the guarantor ceases to be operative three months after the return of the employee to India if the employee remains in India during the said period of three months and the guarantor gives prompt notice to the Assessing Officer concerned of the employee's return to India. 3. A number of representations have been received by the Board that the procedure of obtaining the tax clearance certificate in the cases of foreign employees not domiciled in India, each and every time such employee wants to go abroad, is cumbersome and time consuming. In order to alleviate this difficulty, it has been decided to provide the facility of one-time clearance certificate to the foreign employee not domiciled in India who has a fixed tenure of service in India up to five years, to travel abroad any number of times during the period of the contract of his service. 4. This one-time clearance certificate will be given in the case of those foreign employees whose employer gives a guarantee in the prescribed form that if any tax is found due against the employee during the entire period of the contract of service plus two years, the same shall be paid by the employer. The guarantee may also cover the tax liabilities of the spouse and dependants of the foreign employee; in such a case the spouse and dependants of the employee would also be entitled to the benefit of one time clearance certificate. The revised form of guarantee which is to be used for the above purpose is enclosed. The above procedure will apply only in such cases where the employer of the foreign employee is an Indian concern, or a foreign concern which is assessed to tax in India and has a fixed place of business in India. Where the foreign employee is not interested in obtaining such a guarantee from the employer or the employer is not willing to furnish such a guarantee, the hitherto existing procedure will continue to be followed. 5. In cases where the guarantee in the revised form is furnished, the tax clearance certificate to be issued by the Assessing Officer, foreign section will be made valid for journeys to be performed by the foreign employee up to the last date of the contract of service as mentioned in the guarantee form. The concerned Chief Commissioner/Director-General of Income-tax will have the right to withdraw the facility in suitable cases in the interest of Revenue. 6. The Chief Commissioners of Income-tax and Directors-General of Income-tax may bring the contents of this circular to the notice of all the officers working in their regions for strict compliance. (Sd.) Dinesh Verma, Under Secretary (FTD).