Leaving India? Who Actually Needs an Income-Tax Clearance Certificate
You have the job offer, the visa and the flight booked. Then a forwarded message says every Indian must now get income-tax clearance before leaving the country, and the new Forms 156 and 157 seem to prove it.
For most people that is wrong. But for a small group, especially anyone with a large unpaid tax demand, the rule is real, and finding out at the departure gate is the most expensive way to learn it.
Quick answer: Section 420 of the Income-tax Act, 2025 (old section 230) does not require every traveller to get a tax clearance certificate. A person domiciled in India needs one only if the Assessing Officer asks, which CBDT limits to serious financial irregularities or unstayed direct-tax arrears above ₹10 lakh.
Contents
What does section 420 actually require?
From 1 April 2026, section 230 of the Income-tax Act, 1961 is replaced by section 420 of the Income-tax Act, 2025. The text is almost the same. It deals with three different groups of people, and most confusion comes from mixing them up.
Who | What section 420 says | Form (old form) |
|---|---|---|
Foreign national in India for business, profession or employment, with Indian income | Must give an undertaking from the employer or payer that tax will be paid, and gets a no-objection certificate | Form 154 (30A) and Form 155 (30B), s.420(1) |
Person domiciled in India, at departure | Must furnish PAN, purpose of visit and estimated stay abroad, subject to notified exceptions | Form 156 (30C), or Form 157 without PAN, s.420(3)/(4) |
Domiciled person whom the AO specifically requires to obtain clearance | Cannot leave without a certificate that no tax is due or that payment has been arranged | Form 158 (31) to apply, Form 159 (33) issued, s.420(5) |
The certificate in the last row covers liabilities under the Income-tax Act, 2025 and the 1961 Act, the Wealth-tax, Gift-tax and Expenditure-tax Acts, and the Black Money Act, 2015.
Who needs a tax clearance certificate?
Only the third group needs a tax clearance certificate. Section 420(5) applies to a domiciled person "in respect of whom circumstances exist" which, in the opinion of an income-tax authority, make a certificate necessary.
CBDT Instruction No. 1/2004 dated 5 February 2004 limits those circumstances to two cases:
The person is involved in serious financial irregularities, their presence is needed in an investigation under the Income-tax or Wealth-tax Act, and a tax demand is likely to be raised.
The person has direct-tax arrears exceeding ₹10 lakh that have not been stayed by any authority.
Section 420(6) adds two safeguards. The officer must record reasons in writing and must obtain prior approval of the Principal Chief Commissioner or Chief Commissioner.
The instruction was issued under the 1961 Act. Section 536(2)(j) of the 2025 Act keeps such instructions in force so far as they are not inconsistent with the new Act, and government sources told the press in April 2026 that the policy is unchanged.
Do you have to file Form 156 every time you fly?
This is where the 2026 confusion started. Section 420(3) says every person domiciled in India shall furnish PAN, purpose of visit and estimated stay abroad, "subject to such exceptions as the Central Government may, by notification, specify".
The Income Tax Department's FAQ on Form 156 describes it as event-based and mandatory subject to notified exceptions. The same obligation sat in section 230(1A) and Form 30C for over two decades without being run as a routine departure check.
After the April 2026 viral claims, government sources said there is no rule that every person leaving India must file any form.
Form 156 asks only for identity, PAN, passport, purpose and expected duration. It is a declaration, not a clearance, and needs no proof of tax payment.
Form 157 is the version for someone without a PAN or without taxable income.
If an officer or your employer does ask for Form 156, it is filed and e-verified on the e-filing portal and cannot be edited after submission.
Our reading: a routine traveller with filed returns and no large unstayed demand has nothing to obtain before flying. Watch for any CBDT notification under section 420(3) that changes this.
Worked example 1: moving to Canada for a job
Riya is an Indian citizen, domiciled in India, salaried in Bengaluru. She leaves on 20 September 2026 to take up a job in Toronto. Her returns are filed and her only open item is a ₹42,000 demand from an intimation, which she has disputed online.
Serious financial irregularities or investigation: none.
Unstayed direct-tax arrears above ₹10 lakh: no, the demand is ₹42,000.
Has the AO recorded reasons and got Pr. CCIT approval: no.
Result: no tax clearance certificate is needed. She simply flies.
Her residential status for tax year 2026-27 matters more. She is in India from 1 April to 20 September 2026, which is 173 days.
Below 182 days, so section 6(2)(a) of the 2025 Act (old section 6(1)(a)) is not met.
She leaves for employment outside India, so the 60-day test in section 6(2)(b) does not apply (section 6(3)(b); old Explanation 1(a) to section 6(1)).
So she is a non-resident for tax year 2026-27, and her Canadian salary is outside Indian tax.
The day-count rules, including the 120-day variation for visitors, are in our guide to the NRI residential status tests.
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Worked example 2: ₹18 lakh demand under appeal
Mehul runs a trading business in Ahmedabad and plans to move to Dubai. A scrutiny assessment for AY 2023-24 has raised a demand of ₹18,00,000. He has appealed to the Commissioner (Appeals) under section 357 of the 2025 Act (old section 246A), but has not paid anything or applied for stay.
Position | Unstayed arrears | Falls in ₹10 lakh test? |
|---|---|---|
No payment, no stay | ₹18,00,000 | Yes, the AO can seek approval to require clearance |
Pays 20% (₹3,60,000) and AO grants stay on the balance | Nil (₹14,40,000 stayed) | No |
Pays ₹9,00,000, no stay order | ₹9,00,000 | No, but recovery action can continue |
Pays the full demand | Nil | No |
The cleanest route is a stay application under section 411(12) of the 2025 Act (old section 220(6)), usually on payment of 20% of the disputed demand under the CBDT's stay guidelines. See how stay of demand works.
Get the stay order in writing before booking. If the AO has already required clearance, Mehul files Form 158 on the e-filing portal with his passport, PAN, tickets and payment proof, and travels only within the dates on Form 159.
Foreign nationals working in India: Forms 154 and 155
Section 420(1) is aimed at a person who is not domiciled in India, came for business, profession or employment, and has Indian-source income.
Before leaving, they furnish an undertaking in Form 154 (old Form 30A) from the employer or from the person paying them, that the tax payable will be paid.
The prescribed authority then issues a no-objection certificate in Form 155 (old Form 30B), valid for the period stated.
A foreign national visiting as a tourist, or for any purpose not connected with business, profession or employment, is outside section 420(1) under section 420(2).
The section allows the Central Government to notify exceptions, so employers should confirm current practice with the jurisdictional authority before an expatriate's final departure.
Expatriate salary is subject to TDS, and the employer's undertaking is only as good as its payroll. Settle the final month's TDS and Form 130 (old Form 16) before the exit.
Leaving for good: can the AO assess you early?
Yes, in limited cases. Section 317 of the 2025 Act (old section 174) lets the AO assess an individual who may leave India in the current tax year, or shortly after, with no present intention of returning.
Income from the start of the tax year up to the probable date of departure can be taxed in that same year, at that year's rates.
The AO can serve a notice giving at least seven days to file a return for that period.
This is rare in practice, but it is one reason to file all pending returns and respond to open notices before emigrating.
If a notice does arrive after you have moved, how NRIs should respond to income-tax notices covers the steps.
Decision checklist before you book the flight
Are all returns filed up to the last tax year, including any belated or updated return you need?
Check the e-filing portal for outstanding demands. Is any single total of unstayed direct-tax arrears above ₹10 lakh?
If yes, is an appeal filed, and do you hold a written stay order, or have you paid?
Is there any search, survey or investigation in which your presence may be required?
Have you received any communication requiring a certificate under section 420(5)? If so, file Form 158 early.
If you are moving for good, is your residential status for the year of departure worked out?
Have you planned your Indian accounts (NRO/NRE) and foreign asset reporting for the year you return, if ever?
Common mistakes
Assuming everyone needs clearance. People delay moves or pay agents for a certificate the law does not require of them.
Assuming nobody needs it. An unstayed ₹10 lakh-plus demand is exactly the case the rule targets. Ignoring the AO's requirement can mean being stopped at departure.
Treating an appeal as a stay. Filing an appeal does not stay the demand. You need a stay order or payment.
Confusing domicile with residence. Section 420(3) to (6) turn on domicile, a general-law concept. A non-resident for tax can still be domiciled in India.
Filing Form 158 at the last minute. There is no statutory time limit for the AO to issue Form 159. Allow time for processing.
Travelling outside the certificate's dates. Form 159 is valid only for the period stated on it.
Practitioner insights
The ₹10 lakh figure dates from 2004 and has not been revised. Clients with large demands from reassessment or search cases cross it easily.
The Finance (No. 2) Act, 2024 brought Black Money Act liabilities into section 230(1A) from 1 October 2024. A Schedule FA lapse that becomes a Black Money Act demand can therefore matter at departure; see Black Money Act demands and penalties.
Look-out circulars are a separate mechanism outside the Income-tax Act. Section 420 compliance does not address them.
Under section 420(7), an airline or shipping operator that carries a person covered by section 420(1) or (5) without checking the certificate can be made personally liable for that person's tax.
Summary table: old and new references
Item | Income-tax Act, 1961 / Rules, 1962 | Income-tax Act, 2025 / Rules, 2026 |
|---|---|---|
Tax clearance for persons leaving India | Section 230 | Section 420 |
Foreign national: employer undertaking / NOC | Section 230(1), Forms 30A and 30B | Section 420(1), Forms 154 and 155 |
Domiciled person: departure details | Section 230(1A), Form 30C | Section 420(3)/(4), Forms 156 and 157 |
Application for clearance certificate | First proviso to s.230(1A), Form 31 | Section 420(5), Form 158 |
Tax clearance certificate | Section 230(1A), Form 33 | Section 420(5), Form 159 (Rule 228) |
Reasons and Pr. CCIT / CCIT approval | Second proviso to s.230(1A) | Section 420(6) |
Assessment of persons leaving India | Section 174 | Section 317 |
Stay of demand pending appeal | Section 220(6) | Section 411(12) |
Appeal to Commissioner (Appeals) | Section 246A | Section 357 |
Savings for old instructions | n/a | Section 536(2)(j) |
Frequently asked questions
Is an income-tax clearance certificate mandatory to leave India in 2026?
No. Under section 420(5) of the Income-tax Act, 2025 (old section 230(1A)), a person domiciled in India needs a tax clearance certificate only if the Assessing Officer requires one. CBDT Instruction No. 1/2004 limits this to serious financial irregularities or unstayed direct-tax arrears above ₹10 lakh.
What is the difference between Form 156, Form 158 and Form 159?
Form 156 (old Form 30C) is a declaration of PAN, purpose of travel and expected stay abroad under section 420(3). Form 158 (old Form 31) is the application for a tax clearance certificate, filed only when the AO asks for one. Form 159 (old Form 33) is the certificate the AO issues.
Can the income-tax department stop me at the airport for a pending demand?
Only if the AO has required a clearance certificate under section 420(5), after recording reasons and getting approval from the Principal Chief Commissioner or Chief Commissioner under section 420(6). A pending demand alone does not do this. Airline and shipping operators must check certificates only for people to whom section 420(1) or 420(5) applies.
Does a pending demand above ₹10 lakh automatically mean I need clearance?
No. The ₹10 lakh test counts only direct-tax arrears that are not stayed by any authority, and even then the AO must record reasons and get approval. Paying the demand, or getting a stay while an appeal is pending, takes you outside this test.
Do NRIs visiting India need a tax clearance certificate to fly back?
Generally no. Section 420(3) to (6) applies to persons domiciled in India, which is a different test from tax residence, and a certificate is required only where the AO has called for one. A foreign national visiting as a tourist is outside section 420(1) under section 420(2).
How long is a tax clearance certificate valid?
Form 159 is valid only for the period stated on it (Rule 228(6) of the Income-tax Rules, 2026). If your travel dates change, check whether the certificate still covers them, and apply again for a later journey.
Is the tax clearance rule new under the Income-tax Act, 2025?
No. The requirement for domiciled persons has existed since 1 June 2003 under section 230(1A). The Finance (No. 2) Act, 2024 added Black Money Act liabilities to it, and the 2025 Act carried it over as section 420 with new form numbers.
Related reading
Sources
Income-tax Act, 2025 (text on incometaxindia.gov.in): sections 6, 317, 357, 411(12), 420 and 536(2)(j). Income-tax Act, 1961: sections 6, 174, 220(6), 230 and 246A. Income-tax Rules, 2026: Rule 228 and Forms 154 to 159; Income Tax Department FAQs and form notes on Forms 156, 158 and 159. CBDT Instruction No. 1/2004 dated 5 February 2004, as reiterated in the Ministry of Finance release on PIB dated 20 August 2024. Finance (No. 2) Act, 2024 (Black Money Act reference in section 230(1A)). Figures are illustrative. Educational content only, reflecting the law as of 9 November 2026.
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