Section 420 — Tax clearance certificate. Successor to s.230 of the 1961 Act.
Section 420 is in Chapter XIX — Collection and Recovery of Tax, which runs from section 390 to section 430.
Sub-section (1) stops a person who is not domiciled in India, has come to India in connection with business, profession or employment, and has income from an Indian source, from leaving India by land, sea or air unless he furnishes to the prescribed authority an undertaking in the prescribed form from his employer, or from the person through whom he receives the income, that his tax will be paid by that employer or person — on receipt of which the authority must immediately give him a no objection certificate. Sub-section (2) takes the requirement off a non-domiciled person visiting as a foreign tourist or for any purpose unconnected with business, profession or employment. Sub-sections (3) and (4) put a lighter duty on a person domiciled in India who is departing: furnish his Permanent Account Number allotted under section 262, the purpose of the visit and the estimated period of stay abroad, in the prescribed form, or a prescribed certificate where he has no PAN, is not required to obtain one, or his total income is not chargeable. Sub-section (5) is the actual tax clearance certificate: a domiciled person in whose case an income-tax authority is of the opinion that circumstances make it necessary may not leave India without a certificate that he has no liability under this Act, the Wealth-tax Act, 1957, the Gift-tax Act, 1958, the Income-tax Act, 1961, the Expenditure-tax Act, 1987 or the Black Money Act, 2015, or that satisfactory arrangements have been made for payment — and sub-section (6) allows that requirement to be imposed only on reasons recorded and with the prior approval of the Principal Chief Commissioner or Chief Commissioner. Sub-sections (7) to (10) make the owner or charterer of a ship or aircraft who carries such a person without satisfying himself about the certificate personally liable for the tax as the Assessing Officer determines, deem him an assessee in default recoverable as an arrear of tax, empower the Board to make rules, and extend "owner" and "charterer" to representatives, agents and employees empowered to allow travel.
It prevents departure from India being used to escape an outstanding or anticipated tax liability, by fixing responsibility on the employer or payer for a non-domiciled worker and, for domiciled persons, by allowing a clearance requirement in individual cases with senior approval. Enrolling the carrier as personally liable gives the requirement practical force at the point of departure.
For a non-domiciled employee, the document that clears departure is not one he obtains himself — it is an undertaking from his employer or payer that his tax will be paid, on which the prescribed authority must issue the no objection certificate immediately. A foreign tourist or anyone visiting for reasons unconnected with business, profession or employment is outside the requirement entirely. Persons domiciled in India ordinarily need only give PAN, purpose and estimated period of stay; a full clearance certificate can be demanded only in a specific case, on recorded reasons approved by the Principal Chief Commissioner or Chief Commissioner. Airlines and shipping operators carry real exposure: allowing a covered passenger to travel without satisfying themselves about the certificate makes the owner or charterer personally liable for the tax, recoverable as an arrear.
A non-domiciled engineer who came to India for employment and draws Indian-source income books a flight out. Sub-section (1) stops him from leaving unless an undertaking in the prescribed form is furnished to the prescribed authority by his employer, or by the person through whom he receives the income, that his tax will be paid by them — the document is not his to obtain, and on receipt of it the authority must immediately give him a no objection certificate; a foreign tourist in the next seat is outside the section entirely under sub-section (2). A person domiciled in India ordinarily gives only his Permanent Account Number allotted under section 262, the purpose of his visit and the estimated period of stay abroad. A full clearance certificate can be demanded of him only where an income-tax authority records reasons and obtains the prior approval of the Principal Chief Commissioner or Chief Commissioner, and it certifies no liability under the Wealth-tax Act, 1957, the Gift-tax Act, 1958, the Income-tax Act, 1961, the Expenditure-tax Act, 1987 and the Black Money Act, 2015 as well as this Act. If the airline lets a covered passenger travel without satisfying itself about that certificate, sub-section (7) makes the owner or charterer personally liable for his tax, recoverable as an arrear.
At departure — in the employer's undertaking in the prescribed form and the no objection certificate the prescribed authority issues on it, in the prescribed form by which a domiciled traveller gives PAN, purpose and estimated period of stay, and at the ship or airline operator's counter, since the owner or charterer must satisfy himself before allowing travel. The Board may make rules regulating the whole procedure under sub-section (9).
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
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.
See the circulars index.
See the notifications index.
