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.
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. 5 crore.
Thus, an educational institution having receipts up to Rs. 5 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.
Exemption in the case of an educational institution having receipts exceeding Rs. 5 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).
An application for fresh registration under section 10(23C) will be given to Principal Commissioner or Commissioner. A provisional registration for 3 years will be given to organisations. The registration once granted shall be valid for three years from the Assessment Year from which the registration is sought. Application for renewal of such new registration needs to be submitted
- at least six months prior to the expiry of validity period or
- within 6 months from commencement if activities,
whichever is earlier.
The provisional registration so granted shall be valid for a period of 3 years and hence needs to be renewed at the end of the above mentioned timelines. The registration so renewed shall be valid only for 5 years and needs to be renewed at the end of each 5 years.
In order to claim exemption, an NGO should make an application to the Principle Commissioner or Commissioner of Income Tax online in Form 10A by following below mentioned steps:
a) Log on to the E-filing portal of IT department vide https://www.incometaxindiaefiling.gov.in/home
b) Go to “Income Tax Forms” under e-File tab.
c) Select the Form Name as “Form 10A” and relevant Assessment Year from the drop down list.
d) Select the option of “Prepare and Submit Online” in submission mode.
e) Fill in the details as required in the form and attach the required and applicable attachments.
f) Submit the form using digital signatures or EVC as required while return filing.
The application shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant. The following documents are required to be submitted:
a) Self-certified copy of incorporation document of Trust/Societies (created under instrument or otherwise)
b) Self-certified copy of registration with Registrar of Companies or Registrar of Firms or societies or Registrar of Public Trusts, as the case may be
c) Self-certified copy of registration under FCRA, if the applicant is registered under such Act
d) Self-certified copy of existing order of registration under section 12A or 12AA or 12AB, as the case may be
e) In case of existing entities, copies of annual accounts for the period not exceeding 3 years immediately preceding the year in which the application is made
f) Where the income of the entity includes profits and gains of business as per the provisions of sub-section (4A) of section 11, copies of annual accounts and audit report u/s 44AB for 3 years immediately preceding the year in which the said application is made
g) Self-certified copy of the documents evidencing adoption or modification of the objects
h) Notes on the activities of the applicant trust or institution
i) If registered on DARPAN Portal, then details of such registration
All registered NGOs are required to apply for re-validation in Form No. 10A, within three months from 1st April 2021. Registration so re-validated shall be valid only for 5 years. The application for the renewal of registration (after five years) needs to be submitted at least six months prior to the expiry of validity period. The renewal application will be submitted in the Form No. 10AB.
No Simultaneous benefits for NGOs u/s 12A and 10 (23C) (As amended by Finance Act, 2020)
Where any organisation’s registration has become non-operative due to simultaneous exemptions in various other sections [10(23C)] in that case it has to reapply under section 12AB. The registration will be given for 5 years, has to be renewed in every five years. The application to be submitted at least 60 months prior to expiry of registration.