Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

ITAT EXPLAINS EDUCATION!

Holds continuing education and training programmes of Ahmedabad Management Association entitled to exemption!

Should the term ‘education,’ in the context of the definition of ‘charitable purpose’ under Section 2(15) of the Income-tax Act, be given such a narrow and restricted meaning, so as to include only formal school or college education? Can a public charitable trust pursuing the objects of continuing education, training and research on various facets of management and related areas be denied the benefit of exemption under Section 11 of the Income-tax Act, on the ground that its activities do not fall within the scope of education?

            These two very interesting and important questions recently came up for consideration before the Income-tax Appellate Tribunal (ITAT), Ahmedabad, in the case of Ahmedabad Management Association (AMA). 

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Tax Axe To Chop Charities Too!

Religion & Politics Sheltered As Taxman’s Holy Cow!

Complex Provisions To Perplex Charities

New Jargon – Fresh Norms

  •  Charitable trust to bear the new identity of ‘Non-Profit Organisation (NPO).’  
  • Charitable purpose replaced by the new phrase ‘permitted welfare activity (PWA).’ 
  • Fresh procedure for NPO registration to be undertaken by all charities. 
  • Different & elaborate norms for computing gross receipts and outgoings. 
  • Current benefits of accumulation of income, upto 15% for an indefinite period, and upto any amount for five years, not available under DTC. 
  • Deduction at specified rates (mostly 50%) to be allowed to donors of eligible NPOs. 

15% Tax on eligible NPOs – 30% Tax on other Charities

  • No more tax exemption for income of charities. Even current basic exemption upto Rs.1,60,000 not applicable under DTC. 
  • Taxable surplus of all eligible NPOs (fulfilling as many as 14 prescribed conditions) to be taxed at flat 15%.  
  • All other trusts, though doing charitable work, to attract flat 30% tax on their income as an AOP. 

Several Current Charities may not qualify as eligible NPOs

  • Specific community trusts and associations for benefit of their members, though currently eligible for exemptions as charities, not eligible to be registered as NPOs under DTC. 
  • Where any business (not incidental to PWA) is held under the charity, even though its business income is applied only for PWA.

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