Income of certain Funds of National Importance [Section 10(23C)]

Section 10(23C) of the Income Tax Act, 1961 provides for the exemption of income of certain funds of national importance. This provision aims to encourage and support organizations that are engaged in activities of national importance and are working towards the welfare of the society.

Funds eligible for Exemptions:

Any income received by any person on behalf of the following is exempt from tax:

(i)         The Prime Minister’s National Relief Fund or the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund); or

(ii)        The Prime Minister’s Fund (Promotion of Folk Art); or

(iii)       The Prime Minister’s Aid to Students Fund; or

(iv)       The National Foundation for Communal Harmony; or

(v)        The Swachh Bharat Kosh, set up by the Central Government; or

(vi)       The Clean Ganga Fund, set up by the Central Government; or

(vii)      The Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any State or Union territory; or

(viii)     Any university or other educational institution existing solely for educational purposes and not for purpose of profit; or

(ix)       Any hospital or other institution for the reception and treatment of persons

(i)         suffering from illness or

(ii)        mental defectiveness or

(iii)       during convalescence or

(iv)       requiring medical attention or rehabilitation, existing solely for philanthropic purpose and not for purpose of profit.

The exemption under clause (vii) and (viii) shall be available only to following type of universities/ hospitals/institutions (hereinafter called institutions).

(A)       Institutions which are wholly or substantially financed by the Government, [Section 10(23C) (iiiab) and (iiiac)], or

(B)        Institutions whose aggregate annual receipts do not exceed l crore [Section 10(23C) (iiiad) and (iiiae)], or

(C)        Institutions, other than covered under (A) and (B) above, which may be approved by the prescribed authority. [Section 10(23C) (vi) and (via)].

(x)        The provision also empowers the prescribed authority, on an application, to grant exemption from income-tax by giving approval in respect of

(a)        any other fund or institution established for charitable purposes, having regard to its objects and importance throughout India or throughout any one or more States [Section 10(23C) (iv)]; and

(b)        any trust or institution, which is either wholly for public religious purposes or wholly for public religious and charitable purposes. and which is administered and supervised in a manner so as to ensure that its income is properly applied for its purposes. [Section 10(23C) (v)]

The income of these funds includes income from all sources, such as:

• Donations
• Grants from the government or other organizations
• Income from investments
• Income from events and fundraising activities

Examples of Use of Funds:

Here are some examples of how the income of these funds is used:

• The Prime Minister’s National Relief Fund is used to provide relief to victims of natural disasters and other emergencies.
• The National Defence Fund is used to support the Indian armed forces.
• The Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) is used to provide relief to victims of the COVID-19 pandemic and other emergencies.
• The Chief Minister’s Relief Fund of each State is used to provide relief to victims of natural disasters and other emergencies in that State.
• The National Foundation for Communal Harmony is used to promote communal harmony and peace in India.
• The Jawaharlal Nehru Memorial Fund is used to promote the ideas and ideals of Jawaharlal Nehru.
• The Indira Gandhi Memorial Trust is used to promote the ideas and ideals of Indira Gandhi.
• The Rajiv Gandhi Foundation is used to promote the ideas and ideals of Rajiv Gandhi.
• The Sanjay Gandhi Memorial Trust is used to promote the ideas and ideals of Sanjay Gandhi.
• The Indian Red Cross Society is used to provide humanitarian assistance to people in need.
• The Bharat Scouts and Guides is used to promote character development and citizenship among young people.
• The National Sports Development Fund is used to promote sports development in India.

Important points:

• The exemption under Section 10(23C) is available only to notified funds of national importance.
• The fund must be constituted in India.
• The fund must be established for charitable or public purposes.
• The income of the fund must be applied solely for the purposes for which it is established.
• The fund must not distribute its income in any manner to its members.

The exemption provided under Section 10(23C) plays a crucial role in promoting and supporting organizations that are working towards the betterment of the society. By exempting their income from tax, the government encourages individuals and corporations to contribute to these funds, thereby ensuring the continuity of their noble work.