Section 10(23AA) of the Income Tax Act provides an exemption for income received by any person on behalf of a regimental fund or non-public fund established by the armed forces of the Union for the welfare of past or present members of such forces.
Example:
Let’s say the “Bravehearts Welfare Trust” is a non-public fund set up by the Indian Army to support retired soldiers and their families. If Colonel (Retd.) Sharma, acting as a trustee, receives ₹10,00,000 in donations and interest income on behalf of this fund, then:
- This ₹10,00,000 is not taxable in his hands, because he is receiving it on behalf of a regimental fund.
- The exemption applies regardless of whether the income is from donations, interest, or other sources, as long as it is credited to the fund and used for its intended welfare purposes.
This provision ensures that such welfare-oriented funds are not burdened with tax, allowing them to fully serve their intended beneficiaries.
