The Income Tax Act of 1961 is an essential legal document that outlines the provisions for the assessment, levy, and collection of income tax in India. Sections 10, 11, and 12 of the Income Tax Act deal with the exemption of income earned by certain entities. These entities are mostly charitable and religious organizations that work for the betterment of society. In this blog, we will discuss each of these sections in detail.
Section 10: Exemption of income
Section 10 of the Income Tax Act provides exemptions for certain types of income that are not subject to tax. These include:
Agricultural income: Income derived from agricultural land is exempt from income tax.
Income from house property: If the property is used for residential purposes, the income earned from it is exempt from income tax.
Leave travel concession: Exemption is available for the amount received as leave travel concession from the employer.
Gratuity: The amount received as gratuity is exempt from income tax, subject to certain conditions.
Life insurance: The amount received on maturity or surrender of a life insurance policy is exempt from income tax.
Commuted pension: The amount received as commuted pension is exempt from income tax.
Section 11: Income from property held for charitable or religious purposes
Section 11 of the Income Tax Act provides for the exemption of income derived from property held for charitable or religious purposes. The following conditions must be met for an entity to qualify for exemption under Section 11:
- The entity must be a registered charitable or religious organization.
- The property must be held for charitable or religious purposes.
- The income from the property must be applied towards the charitable or religious purposes of the entity.
- The entity must maintain proper accounts and get them audited.
Section 12: Income of trusts or institutions for charitable or religious purposes
Section 12 of the Income Tax Act provides for the exemption of income earned by trusts or institutions for charitable or religious purposes. The following conditions must be met for an entity to qualify for exemption under Section 12:
- The entity must be a registered charitable or religious organization.
- The income earned by the entity must be applied towards the charitable or religious purposes of the organization.
- The entity must maintain proper accounts and get them audited.
- The entity must file its income tax return in a timely manner.
In addition to the exemptions provided under Sections 10, 11, and 12 of the Income Tax Act, there are also several other provisions for tax exemptions for entities that work for charitable and social causes. These include:
- Donations made to charitable institutions: Donations made to charitable institutions are eligible for tax deductions under Section 80G of the Income Tax Act. The amount of deduction depends on the nature of the donation and the tax bracket of the donor.
- Income earned by trusts or institutions for scientific research: Income earned by trusts or institutions for scientific research is exempt from income tax under Section 10(23C)(iiiab) of the Income Tax Act.
- Income earned by institutions for promoting sports: Income earned by institutions for promoting sports is exempt from income tax under Section 10(23)(c) of the Income Tax Act.
- Income earned by political parties: Income earned by political parties is exempt from income tax under Section 13A of the Income Tax Act.
It is important for entities working towards social causes to understand these provisions and take advantage of them to ensure that they can channel their resources towards their intended objectives. However, it is also important to ensure that all the necessary requirements and conditions are met to qualify for these exemptions.
Conclusion
In conclusion, the Income Tax Act provides several provisions for tax exemptions for entities working for charitable and social causes. These exemptions are meant to encourage and support such entities and provide them with the resources they need to fulfill their objectives. It is essential for these entities to comply with the necessary requirements and conditions to qualify for these exemptions and take advantage of them.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Frequently Asked Questions (FAQs)
Who is eligible for exemption under Section 10 of the Income Tax Act?
A: Individuals who earn agricultural income, income from a residential property, leave travel concession, gratuity, life insurance, and commuted pension are eligible for exemption under Section 10 of the Income Tax Act.
What are the conditions for exemption under Section 11 of the Income Tax Act?
A: The entity must be a registered charitable or religious organization, the property must be held for charitable or religious purposes, the income from the property must be applied towards the charitable or religious purposes of the entity, and the entity must maintain proper accounts and get them audited.
What is the deduction available under Section 80G of the Income Tax Act?
A: Donations made to charitable institutions are eligible for tax deductions under Section 80G of the Income Tax Act. The amount of deduction depends on the nature of the donation and the tax bracket of the donor.
What is the exemption available for income earned by trusts or institutions for scientific research?
A: Income earned by trusts or institutions for scientific research is exempt from income tax under Section 10(23C)(iiiab) of the Income Tax Act.
Who is eligible for exemption under Section 12 of the Income Tax Act?
A: Trusts or institutions that work for charitable or religious purposes are eligible for exemption under Section 12 of the Income Tax Act.
What is the exemption available for income earned by institutions for promoting sports?
A: Income earned by institutions for promoting sports is exempt from income tax under Section 10(23)(c) of the Income Tax Act.
What is the exemption available for income earned by political parties?
A: Income earned by political parties is exempt from income tax under Section 13A of the Income Tax Act.
What are the consequences of not maintaining proper accounts for entities eligible for exemption under Sections 11 and 12 of the Income Tax Act?
A: Entities that do not maintain proper accounts or do not get them audited can lose their eligibility for exemption under Sections 11 and 12 of the Income Tax Act.
Is there a limit on the amount of income that can be exempt under Section 10 of the Income Tax Act?
A: No, there is no limit on the amount of income that can be exempt under Section 10 of the Income Tax Act.
Can an entity be eligible for exemption under both Sections 11 and 12 of the Income Tax Act?
A: Yes, an entity can be eligible for exemption under both Sections 11 and 12 of the Income Tax Act if it fulfills the necessary conditions for both sections.
