Understanding Section 10(23C) of the Income Tax Act: Eligibility and Conditions

Section 10(23C) of the Income Tax Act provides an exemption to income received by specified entities from certain sources. Let’s take a closer look at the provisions of this section and understand its implications.

Entities covered under Section 10(23C) Section 10(23C) applies to income received by the following entities:

1. Any university or other educational institution existing solely for educational purposes and not for profit;
2. Any hospital or other institution existing solely for philanthropic purposes and not for profit;
3. Any fund or institution established for charitable purposes, which is approved by the prescribed authority.

Sources of Income covered under Section 10(23C) The following types of income are exempt under Section 10(23C):

1. Income from property held for charitable purposes: Any income received by the above-mentioned entities from property held for charitable purposes is exempt under this section.
2. Income from voluntary contributions: Any voluntary contribution made to the above-mentioned entities for charitable purposes is exempt under this section.
3. Income from investments: Any income earned from investments made by the above-mentioned entities for charitable purposes is exempt under this section.
4. Income from activities undertaken for charitable purposes: Any income earned by the above-mentioned entities from activities undertaken for charitable purposes is exempt under this section.

Conditions for availing exemption under Section 10(23C) To avail exemption under Section 10(23C), the following conditions must be satisfied:

1. The entity must exist solely for charitable or educational purposes and not for profit.
2. The entity must be approved by the prescribed authority.
3. The income received by the entity must be used for charitable or educational purposes.

It is important to note that the income exempted under Section 10(23C) cannot be claimed as a deduction under any other provisions of the Income Tax Act.

Conclusion

Section 10(23C) of the Income Tax Act provides an exemption to income received by certain entities from specified sources. This exemption is subject to certain conditions, which must be satisfied by the entity to avail of the benefit of exemption. By providing this exemption, the government encourages philanthropic and charitable activities, which are essential for the betterment of society

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1. What is Section 10(23C) of the Income Tax Act? Section 10(23C) of the Income Tax Act provides an exemption from income tax for income received by certain entities that exist solely for charitable or educational purposes and not for profit. The exemption applies to income received from specified sources and used for charitable or educational purposes only.
2. Who is eligible for exemption under Section 10(23C)? Entities that may be eligible for exemption under Section 10(23C) include universities, schools, hospitals, research institutions, trusts, foundations, and NGOs. These entities must meet the conditions specified under the law to avail of the exemption.
3. What are the conditions for availing of exemption under Section 10(23C)? The entity seeking exemption must exist solely for charitable or educational purposes and not for profit. It must be approved by the prescribed authority, which is typically the Commissioner of Income Tax or Director of Income Tax. The entity must also use the income received for charitable or educational purposes only.
4. What are the sources of income covered under Section 10(23C)? Income received from specified sources such as donations, grants, and gifts, and used for charitable or educational purposes only is eligible for exemption under Section 10(23C).
5. How does Section 10(23C) impact the tax liability of eligible entities? Entities that are eligible for exemption under Section 10(23C) do not need to pay income tax on the income received from specified sources. This can significantly reduce their tax liability and free up resources for their charitable or educational activities.
6. Can entities covered under Section 10(23C) engage in any other activities besides charitable or educational activities? Entities covered under Section 10(23C) can engage in activities that are incidental or ancillary to their main charitable or educational activities. However, if they engage in any activity that is not for charitable or educational purposes, such income may not be eligible for exemption under Section 10(23C) and may be taxed at the applicable rate.
7. Is all income received by a charitable or educational institution exempt under Section 10(23C)? No, only income received from specified sources and used for charitable or educational purposes is eligible for exemption under Section 10(23C). Entities covered under Section 10(23C) should be aware of the scope and limitations of the exemption and seek professional advice if needed.
8. Are there any recent developments or updates related to Section 10(23C)? The tax laws are subject to change, and entities covered under Section 10(23C) should keep track of any updates or developments that may impact their eligibility for exemption. They should consult with a tax professional or seek guidance from the relevant authorities if needed.