Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Income of certain Funds of National Importance, Educational Institutions and Medical Institutions is Exempt from Tax [Section 10(23C) and Rule 2C and 2CA]

Income of certain Funds of National Importance, Educational Institutions and Medical Institutions is Exempt from Tax
Income of certain Funds of National Importance, Educational Institutions and Medical Institutions is Exempt from Tax

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

  1. Prime Minister’s National Relief Fund or the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND)
  2. The Prime Minister’s Fund (Promotion of Folk Art); or
  3. The Prime Minister’s Aid to Students Fund; or
  4. The National Foundation for Communal Harmony; or
  5. The Swachh Bharat Kosh, set up by the Central Government or
  6. The Clean Ganga Fund, set up by the Central Government: or
  7. The Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any State or Union territory
  8. Any university or other educational institution existing solely by for educational purposes and not for purpose of profit and which is wholly or substantially finance by the Government ; or
  9. 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 and which is wholly or substantially financed by the Government; or

  1. Any university or other education institution existing, solely for educational purposes and not for purpose of profit if the aggregate annual receipts of such university or education institution do not exceed 1,00,00,000 (Rs. 1 Crore) [Sub-clause (iliad)]; or
  2. Any hospital or other medical institution for the purpose mentioned in clause (h) above where aggregate annual receipts do not exceed Rs. 1,00,00,000 (Rs. 1 Crore) [Sub-clause (iiiac)]; or
  3. Any other fund or institution established for charitable purposes which may be approved by the prescribed authority having regards to its object and its importance throughout India or throughout any State or States [Sub-clause (iv)]; or
  4. Any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes which may be approved by the prescribed authority having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto his properly applied for the objects thereof [Sub-clause (v)]; or
  5. Any university or other educational institution existing solely for educational purposes and not for purpose of profit other than those mentioned in clause (7) and (9) above i.e. whose aggregate annual gross receipts exceed Rs. 1,00,00.000 [Sub-clause (vi)]; or
  6. Any hospital or other institution for the purpose mentioned in clause (8) above but other than those mentioned in clause (8) and (10) above i.e. whose aggregate annual receipts exceed Rs. 1,00,00,000 (Rs. 1 Crore) [Sub-clause (via)]

1.   Conditions for Claiming Exemption

 

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University or Educational Institution or Hospital or Medical Institution who are substantially financed by the Government [Section 10(23C)(iiiab) and (iiiac) University or Educational Institution or Hospital or Medical Institution whose aggregate annual gross receipts do not exceed Rs.1 Crore [Section 10(23C)(iiiad) & (iiiae) University or Educational Institution or Hospital or Medical Institution whose aggregate annual gross receipts exceed Rs.1 Crore [Section 10(23C)(vi) or (via) Charitable or Religious Institution covered under Section 10(23C)(iv) or (v)
1. Whether application for grant for exemption necessary No No Yes, approval is necessary Yes, approval is required
2. Form in which
application is to be made and to whom it should be made
NA NA Form No. 56 (56D upto 4.9.2019) lobe furnished electronically to the jurisdictional Principle Commissioner /
Commissioner of Income Tax (Exemption)
Form No. 56 to be furnished electronically to the jurisdictional Principle Commissioner /
Commissioner of Income Tax (Exemption)
3. Time period within which application is to be made NA NA If application is made on or after 1.4.2009, it shall be made on or before 30th September of the relevant assessment year from which exemption is sought.
Prior to this it was required to be made before the end of the relevant assessment year.
If application is made on or after 1.4.2009, it shall be made on or before 30th September of the relevant assessment year from which exemption is sought.
Prior to this it was required to be made before the end of the relevant assessment year.
4. Period of the validity of exemption NA NA If application has been made on or after 13.7.2006, it is a permanent exemption unless withdrawn. However, if application has been made before 13.7.2006, the exemption will for a period of 3 years and fresh application shall have to be made after the expiry of un-expired period of 3 years which shall also be permanent exemption unless withdrawn If application has been made on or after 13.7.2006. ii is a permanent  exemption unless withdrawn. However, if
application has be been made before 13.7.2006, the exemption will be for a period
of 3 years and fresh application shall have to be made after the expiry of un expired period of 3 years which shall also be permanent exemption unless withdrawn
5. Time period within which exemption has to be granted or rejected NA NA If application is made on or after 13.7.2006, its approval is to be granted or rejected within a period of 12 months from the end of the month in which application was received by the authorities. If application is made on or after 13.7.2006. its approval is to be granted or rejected with in a period of 12 months from the end of the month in which application was received by the Authorities .
6.  Whether Audit of Accounts is Compulsory No No Yes Tes
7. Whether it is mandatory to file return of income No Yes Yes Yes
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2.   Additional Conditions for Claiming Exemption

The fund, trust or institution covered under section 10(23)(iv), (v), (vi) and (via) should satisfy the following additional conditions to claim exemption under this section:

(1)        At the time of making application in Form No. 56 or 56D, it should furnish such documents (including audited annual accounts) or information which the Central Government or the prescribed authority as the case may be, may consider necessary in order to satisfy itself about the genuineness of the activities of the fund or trust or institution / university / hospital, etc. and the Central Government or the prescribed authority, as the case may be, may also make such enquiries as it deems necessary in this behalf.

(2) (a)   it should apply its income, or accumulate it for application, wholly and exclusively to the objects for which it is established and in a case where more than 15% of its income is accumulated, the period of the accumulation of the amount exceeding 15% of its income shall in no case exceed 5 years; and

(b)        it should not invest or deposit its funds for any period during the previous year otherwise than in any one or more of forms or mode specified in section: 11 (5)
However the following are the exceptions to the above requirement of funds to be invested as per provisions of section 11(5).

(i)         where assets held form part of the corpus of the fund, trust or institution or any university or other educational institution or any hospital or other medical institution as on 1.6.1973;

(ii)        where asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution which form part of its corpus as on 1.6.1998.

(iii)       where assets (being debentures issued by, or on behalf of, any company or corporation), were acquired by the fund. trust of institution or any university or other medical institution before L3.1983;

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(iv)       where there is any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) and (ii) above, by way of bonus shares allotted it;

(v)        where voluntary contributions are received and maintained in the form of jewellery , furniture or any other article as the Board may, by notification in the official gazette, specify;

(vi)       where voluntary contribution is received in kind, it has not been held in a mode other than 11(5) after the expiry of I year from the end of the previous year in which such asset is acquired.

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