Tax Clearance Certificate for Leaving India: Section 420, Forms 154 to 159 (Income Tax Act 2025)

Section 420 of the Income-tax Act, 2025 controls tax checks at the point of leaving India. Most people leaving India only have to give their PAN, the purpose of the trip and the estimated length of stay. A tax clearance certificate is needed only in two situations: a person not domiciled in India who is here for business, profession or employment, and a person domiciled in India whom an income-tax authority specifically requires to get one. The forms are 154 to 159 under rules 227 to 229 of the Income-tax Rules, 2026.

This guide goes through each case, the form that goes with it, who issues the certificate, and what happens to an airline or ship operator that lets someone travel without one. Everything is taken from section 420 and rules 227 to 229 (law as amended by the Finance Act, 2026). Last reviewed on 10 November 2026.

Who has to get a tax clearance certificate before leaving India?

Section 420 sorts travellers into four cases. Only the first and the fourth need a certificate from the tax department.

Case	Who	What they must give	Form
1. Section 420(1)	Not domiciled in India, came to India for business, profession or employment, and has income from a source in India	Undertaking from the employer, or from the person through whom the income is received, that the tax will be paid. The authority then issues a no objection certificate immediately.	Undertaking: Form 154. No objection certificate: Form 155
2. Section 420(3)	Domiciled in India at the time of departure	PAN, purpose of the visit abroad, estimated period of stay	Form 156
3. Section 420(4)	A person in case 2 who has no PAN, or whose total income is not chargeable to income-tax, or who is not required to obtain a PAN	A certificate in the prescribed form	Form 157
4. Section 420(5)	Domiciled in India, and an income-tax authority considers a certificate necessary	A certificate that there is no tax liability, or that satisfactory arrangements have been made to pay it	Application: Form 158. Certificate: Form 159

All of these are subject to exceptions the Central Government may notify under section 420(1) and (3). The notification is not part of the Act or Rules text, so check it for the traveller in question.

Does a foreign tourist need a tax clearance certificate?

No. Section 420(2) says that section 420(1) does not apply to a person who is not domiciled in India and visits as a foreign tourist, or for any other purpose not connected with business, profession or employment.

How does the case 1 process work for a foreign employee?

1. The employer (or the person through whom the foreign national receives income) gives an undertaking in Form 154 that it will pay the tax payable by the individual (rule 228(1)).
2. It goes to the prescribed authority: the Chief Commissioner of Income-tax or Director-General of Income-tax with jurisdiction over persons not domiciled in India, or an authority they have authorised (rule 227(1)).
3. On receiving the undertaking, the authority immediately gives a no objection certificate in Form 155, valid for the period stated in it (section 420(1), rule 228(2)).
4. A copy of the undertaking and the no objection certificate is sent to the Chief Commissioner or Director-General having jurisdiction (rule 228(7)).

What does a person domiciled in India have to do before travelling abroad?

Every person domiciled in India at the time of departure furnishes the PAN allotted under section 262, the purpose of the visit and the estimated stay, in Form 156 (section 420(3), rule 228(3)). The prescribed authority is the Chief Commissioner of Income-tax with jurisdiction over persons domiciled in India, or an authority they have authorised (rule 227(2)).

If the person has no PAN, has total income that is not chargeable to income-tax, or is not required to obtain a PAN, a certificate is furnished instead in Form 157 (section 420(4), rule 228(4)).

When can the tax department insist on a certificate from someone domiciled in India?

Under section 420(5), a person domiciled in India cannot leave if circumstances exist which, in the opinion of an income-tax authority, make it necessary to obtain a certificate. The certificate must state that the person has no liability under any of these laws, or that satisfactory arrangements have been made to pay the tax that is or may become payable:

• the Income-tax Act, 2025 (section 420(5) lists the 1961 Act, the Wealth-tax Act, 1957, the Gift-tax Act, 1958 and the Expenditure-tax Act, 1987 as well);
• the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

There is a safeguard. Under section 420(6), the authority must record its reasons and get the prior approval of the Principal Chief Commissioner or Chief Commissioner before requiring this from a person domiciled in India.

The application goes to the Assessing Officer with jurisdiction to assess the person (rule 227(3)), in Form 158 (rule 228(5)). The tax clearance certificate comes in Form 159 and is valid for the period mentioned in it (rule 228(6)).

What are the examples of how this works?

Example 1: a foreign engineer on a project. Daniel, a foreign national not domiciled in India, is on a two-year posting with an Indian company and is returning home. His employer gives an undertaking in Form 154 to the Chief Commissioner (or Director-General) with jurisdiction over such persons. Section 420(1) says the authority must immediately give a no objection certificate; the Form 155 it issues is valid for the period stated on it. The employer, not Daniel, has undertaken to pay any tax payable.

Example 2: a tourist. Sophie visits India for two weeks of sightseeing. Section 420(2) takes her outside section 420(1). She does not need an undertaking or a no objection certificate.

Example 3: a resident going abroad for a conference. Ravi, domiciled in India, flies to a week-long conference. He furnishes Form 156 with his PAN, the purpose of the trip and the estimated stay. His total income is chargeable to tax and he holds a PAN, so Form 157 does not come in. Nothing further is needed unless an income-tax authority specifically requires a certificate under section 420(5).

Example 4: a resident with a pending tax matter. Meena, domiciled in India, has a large demand pending. The Assessing Officer thinks a certificate is necessary. After recording reasons and getting the prior approval of the Principal Chief Commissioner or Chief Commissioner (section 420(6)), the officer requires it. Meena applies in Form 158 to the Assessing Officer with jurisdiction over her. She gets Form 159 once there is no liability, or once satisfactory arrangements for the tax are made.

What happens if an airline or shipping company lets someone travel without the certificate?

Under section 420(7), if the owner or charterer of a ship or aircraft carrying persons from India to a place outside India lets a person covered by section 420(1) or (5) travel without first satisfying itself that the person holds the required certificate, the owner or charterer is personally liable for the whole or part of the tax payable by that person, as the Assessing Officer determines. For that sum, the owner or charterer is deemed an assessee in default and the sum is recoverable as an arrear of tax (section 420(8)). "Owner" and "charterer" include a representative, agent or employee empowered to allow persons to travel (section 420(10)).

At departure, any person leaving India must, on the request of a Customs Officer, produce the tax clearance certificate or exemption certificate for examination (rule 229).

Is Form 156 a tax clearance certificate?

No. Form 156 is information a person domiciled in India furnishes (PAN, purpose, estimated stay) under section 420(3). It does not clear tax dues. The clearance certificate is Form 159, issued only on an application in Form 158 under section 420(5), and only where an authority has recorded reasons and obtained prior approval under section 420(6).

Quick reference: forms and authorities

Form	Purpose	Where it goes / who issues	Source
154	Undertaking from employer or payer for a person not domiciled in India	Chief Commissioner / Director-General for non-domiciled persons	Rule 228(1), 227(1)
155	No objection certificate, valid for the period stated	Same authority	Rule 228(2)
156	Information from a person domiciled in India	Chief Commissioner for domiciled persons	Rule 228(3), 227(2)
157	Application where there is no PAN, income not chargeable, or no PAN required	Rule 227 names no separate authority for section 420(4); it follows the section 420(3) authority	Rule 228(4)
158	Application for a certificate under section 420(5)	Assessing Officer with jurisdiction	Rule 228(5), 227(3)
159	Tax clearance certificate, valid for the period stated	Income-tax authority	Rule 228(6)

What are the common mistakes?

• Assuming every departing resident needs a certificate. Most only furnish Form 156. A certificate under section 420(5) is needed only when an authority finds it necessary.
• Treating a foreign tourist like a foreign employee. Section 420(2) exempts non-business, non-employment visits.
• Forgetting the employer's role. For a non-domiciled person, the undertaking in Form 154 comes from the employer or the person through whom income is received.
• Sending the application to the wrong office. Form 158 goes to the Assessing Officer with jurisdiction to assess the person, not to the Chief Commissioner.
• Ignoring the validity period. Forms 155 and 159 are valid only for the period mentioned in them.
• Missing the notified exceptions. Section 420(1) and (3) are subject to exceptions the Government may notify.

How do CA firms handle this for clients?

For a CA, the work is usually clearing pending demands and assessments before a client's travel date, and collecting the right form for foreign employees of corporate clients. Finexo's practice management software helps you track client notices, pending tasks and deadlines in one place, so a clearance request does not surface a week before the flight. It does not file the forms for you.

Where is this in the Act?

• Section 420(1): non-domiciled persons, undertaking and no objection certificate
• Section 420(2): foreign tourists excluded
• Section 420(3) and (4): PAN, purpose and period of stay; persons without PAN
• Section 420(5) and (6): certificate where an authority requires it; reasons and prior approval
• Section 420(7), (8) and (10): liability of ship or aircraft owner or charterer
• Section 262: Permanent Account Number
• Rule 227: prescribed authorities; rule 228: forms 154 to 159; rule 229: production to Customs

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.