10 (23C) Registration

Introduction

• Section 10(23C) of the Act is a specific exemption available to certain Government and non-government universities and educational institutions.
• Income received by any university or educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government is fully exempt from tax vide Section 10(23C)(iiiab). Hence, a Government educational institution is fully exempt from income tax without any separate approvals etc. as long as it is not for profit purpose.
• The exemption for non-government (private) educational institutions depends upon the aggregate annual receipts of the university / educational institution.

Educational Institutions/medical institution with annual receipts up to Rs. 1 crore:

Section 10(23C)(iiiad) provides that the income earned by any university or educational institution existing solely for educational purposes and not for the purposes of profit shall be exempt from tax if the aggregate annual receipts of such university or educational institution do not exceed Rs. 1 crore.

Thus, an educational institution having receipts up to Rs. 1 crore can claim full exemption under the above clause without requiring a separate approval or registration.

Here it is important to note that the term  “annual receipts” has not been defined under the law. Keeping in mind the intention of the provisions, annual receipts should mean receipts from the various fees and charges collected by the institution. It can also include the receipts from donations.

Educational Institutions/medical Institution with annual receipts exceeding Rs. 1 crore:

Exemption in the case of an educational institution having receipts exceeding Rs. 1 crore is governed by Section 10(23C)(vi) which states that income earned by any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad), shall be exempt if they are approved by the prescribed authority. Thus, where the aggregate receipts of the institution exceeds Rs. 1 crore, the institution needs a separate approval for claiming the exemption u/s 10(23C).

The Application for approval is required to be made in Form No. 56D along with the necessary supporting documents before the Commissioner of Income Tax (Exemptions). Like the approval u/s 12AA, the approval u/s 10(23C) is also available indefinitely unless it is rescinded by the authorities.

Application for Grant of Exemption

The application form should be sent to the Chief Commissioner or Director General whom the Central Board of Direct Taxes may authorize to act as prescribed authority, for the purposes of sub-clause (iv) or sub-clause (v) of clause (23C) of section 10, through the Commissioner of Income-tax or Director of Income-tax (Exemptions) having jurisdiction over the trust or institution. Following copies of the documents should be annexed:

1. Deed of trust/memorandum and Articles of Association.
2. A list of trustees enclosing settlor/members of the Governing Council.
3. A photocopy of the latest certificate under section 80G issued by the Commissioner of Income-tax.
4. True copies of the assessment orders passed for the last three years
5. Photocopy of communication from the Commissioner of Income-tax with reference to the application of the trust/institution for a registration under section 12A.
6. The applicant shall furnish any other documents or information as required by the Chief Commissioner or Director General or any authority authorized by the Chief Commissioner or Director General.

Form No. 56D

Click here for the Form No 56D