PUBLIC INSTITUTIONS EXEMPT FROM

TAX [SECTION 10]

The Income Tax Act of India, under Section 10, grants tax exemptions to specific public and charitable institutions. Unlike Sections 11 and 12, which require registration, spending norms, and investment restrictions, Section 10 provides direct exemptions without such formalities.

1. INCOME OF A LOCAL AUTHORITY [SECTION 10(20)]
What is a “Local Authority”?

Defined in the Income Tax Act, includes:

• Panchayats (Article 243(d))
• Municipalities (Article 243P(e))
• Municipal Committees/District Boards controlling local funds
• Cantonment Boards (under the Cantonments Act, 1924)

Quantum of Exemption:
Exempt income includes:

• Income from House Property — e.g., rent from municipal buildings
• Capital Gains — e.g., profit from sale of urban land
• Income from Other Sources — e.g., interest from deposits
• Business Income — exempt if:

• Business is within the local area
• Business is for supply of water or electricity even if outside area

Note: Business income from other activities outside the local area is taxable (e.g., intercity bus service).

2. INCOME OF A RESEARCH ASSOCIATION [SECTION 10(21)]

Conditions for Exemption:

• Must be approved under Section 35(1)(iii)
• Income must be used or accumulated for scientific or statistical research
• Funds should be invested as per Section 11(5) (mandatory for donations after 28.02.1983)

Business Income:
Exempt only if:

• Business is incidental to research objectives
• Separate books of accounts are maintained

Audit and Filing:

• Maintain separate accounts
• Conduct annual audit
• Submit reports to the Director General (Exemptions)

Grounds for Withdrawal (w.e.f. 01.04.2003):
Approval can be withdrawn if:

• Income not applied for research
• Funds misused or misinvested
• Activities not genuine
• Conditions of approval are violated
• Opportunity for being heard must be given

3. INCOME OF A NOTIFIED NEWS AGENCY [SECTION 10(22B)]

Quantum of Exemption:
Income is exempt if used solely for gathering and distributing news

Conditions:

• Must be a notified agency
• Income must be applied or accumulated for the stated purpose
• No distribution of profits to members

Examples of Notified Agencies:

• Press Trust of India (PTI)
• United News of India (UNI)

4. INCOME OF PROFESSIONAL ASSOCIATIONS [SECTION 10(23A)]

Eligible Professions:

• Law, Medicine, Engineering, Accountancy, Architecture
• Also includes: Company Secretaries, Cost Accountants, Material Management, Town Planners (as notified)

Quantum of Exemption:
All income is exempt except:

• Income from House Property
• Income from Specific Services
• Interest or Dividends

Conditions:

• Must be a resident association formed in India
• Income must be used or accumulated for advancing the profession
• Requires Central Government approval

Withdrawal of Approval:
Can be revoked if:

• Income is misapplied
• Association violates conditions of approval

5. INCOME OF FUNDS FOR EMPLOYEE WELFARE [SECTION 10(23AAA)]
Conditions for Exemption:
Fund must:

• Be used exclusively for employee welfare
• Be invested as per Section 11(5)

Must be approved by the Principal Commissioner (up to 3 years at a time)

Examples include:

• Recognized Provident Funds
• Approved Superannuation Funds
• Approved Gratuity Funds

Permitted Welfare Uses (as notified by CBDT):

• Retirement superannuation
• Medical emergencies
• Education of children
• Support to deceased employee’s family