10(23C) Registration

10(23C) Registration

Charitable and religious institution can avail tax exemptions under section 10(23C) of the Income Tax Act, 1961. To avail tax exemptions, normally, approval of the Commissioner of Income Tax is necessary, however, there are certain type of institutions which are not required to take approval and can claim exemptions directly.

Under sub-clauses (iiiad) and (iiiae) of section 10(23C) of the Income-tax Act, 1961 educational and medical institutions are totally exempt from tax if the annual aggregate receipt does not exceed Rs. 5 crores.

The Finance Act 2021 has increased the limit of said annual receipts, for exemption under sub-clauses (iiiad) and (iiiae) of Section 10(23C), to Rs. 5 crores. Earlier, this limit was Rs. 1 Crore. The Finance Act, 2021 also provides that the revised threshold limit of Rs. 5 crores shall apply for an assessee with respect to the aggregate receipts from university or educational institution as referred to in sub-clause (iiiad) and the hospital or institution as referred to in sub-clause (iiiae). In other words, if a trust running both medical and educational institutes, the annual receipts from all such institutes shall be aggregated and if it does not exceed Rs.5 crores the exemption shall be available.

Under sub-clauses (iiiab) and (iiiac) of clause (23C) of the Income-tax Act, 1961, educational and medical institutions are totally exempt from tax if they are wholly/ substantially financed by Government.

The condition is that such institutions should be solely for educational or medical purposes.

The income of such organisation shall not be used for any private benefit, but it can be retained in the corpus for future purposes as there is no restriction regarding 85 per cent application of fund.

Only compliance under Income-tax law is the filing of income-tax return in Form ITR7.

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