The government of India has been taking measures to encourage and promote social welfare activities in the country. One of the initiatives taken by the government in this regard is Section 35AC of the Income Tax Act, 1961. The section provides tax benefits to businesses or companies that undertake specified social welfare projects. In this blog, we will take a closer look at Section 35AC of the Income Tax Act, 1961, its provisions, and the benefits it offers.
Introduction to Section 35AC
Section 35AC of the Income Tax Act, 1961, was introduced in 1992 as a means to promote social welfare activities and provide tax benefits to businesses that undertake such projects. The section provides a tax deduction to the tune of 100% of the amount spent by a company on specified social welfare projects. The projects are chosen by the National Committee for Promotion of Social and Economic Welfare, which is appointed by the Central Government.
Provisions of Section 35AC
The provisions of Section 35AC are as follows:
- Eligibility: The tax deduction under Section 35AC is available to all businesses or companies that undertake social welfare projects approved by the National Committee for Promotion of Social and Economic Welfare.
- Amount of Deduction: The amount of tax deduction available under Section 35AC is 100% of the amount spent by the company on the social welfare project.
- Duration of Deduction: The tax deduction under Section 35AC is available for a period of five years starting from the financial year in which the project is commenced.
- Time Limit for Approval: The National Committee for Promotion of Social and Economic Welfare must approve the project before the 31st day of March of the financial year in which the project is proposed to be undertaken.
- Reporting Requirements: The company must provide a report on the progress of the project to the National Committee for Promotion of Social and Economic Welfare every year until the completion of the project.
Benefits of Section 35AC
The benefits of Section 35AC are as follows:
- Tax Benefits: The tax deduction of 100% of the amount spent on social welfare projects provides a significant benefit to businesses and companies.
- Social Welfare: Section 35AC promotes social welfare activities and encourages businesses to undertake projects that benefit society.
- Increased Employment: Social welfare projects create employment opportunities, leading to economic growth and development.
- Reputation: Businesses that undertake social welfare projects gain a positive reputation in the community, enhancing their brand image and reputation.
Conclusion
Section 35AC of the Income Tax Act, 1961, provides a much-needed incentive for businesses to undertake social welfare projects. The tax benefits offered by the section are significant and provide a strong incentive for companies to engage in socially responsible activities. By promoting social welfare projects, Section 35AC contributes to the overall development and growth of the country, creating a win-win situation for both businesses and society as a whole.
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions (FAQs)
Q.1 What is Section 35AC of the Income Tax Act, 1961?
Section 35AC of the Income Tax Act, 1961, provides tax benefits to businesses or companies that undertake specified social welfare projects approved by the National Committee for Promotion of Social and Economic Welfare.
Q.2 What are the benefits of Section 35AC?
The benefits of Section 35AC include tax benefits, promotion of social welfare activities, increased employment opportunities, and a positive reputation for businesses.
Q.3 Who is eligible for the tax deduction under Section 35AC?
All businesses or companies that undertake social welfare projects approved by the National Committee for Promotion of Social and Economic Welfare are eligible for the tax deduction under Section 35AC.
Q.4 How much tax deduction is available under Section 35AC?
The tax deduction available under Section 35AC is 100% of the amount spent by the company on the social welfare project.
Q.5 What is the duration of the tax deduction under Section 35AC?
The tax deduction under Section 35AC is available for a period of five years starting from the financial year in which the project is commenced.
Q.6 What is the time limit for approval of the project under Section 35AC?
The National Committee for Promotion of Social and Economic Welfare must approve the project before the 31st day of March of the financial year in which the project is proposed to be undertaken.
Q.7 What are the reporting requirements for companies undertaking social welfare projects under Section 35AC?
The company must provide a report on the progress of the project to the National Committee for Promotion of Social and Economic Welfare every year until the completion of the project.
Q.8 Is there a limit to the number of social welfare projects that a company can undertake under Section 35AC?
There is no limit to the number of social welfare projects that a company can undertake under Section 35AC.
Q.9 Can individuals claim tax benefits under Section 35AC?
No, individuals cannot claim tax benefits under Section 35AC. Only businesses or companies that undertake social welfare projects approved by the National Committee for Promotion of Social and Economic Welfare are eligible for the tax deduction under Section 35AC.
Q.10 How can a company apply for approval of a social welfare project under Section 35AC?
A company can apply for approval of a social welfare project under Section 35AC by submitting an application to the National Committee for Promotion of Social and Economic Welfare in the prescribed format. The application must include details of the project, the amount to be spent, and the expected outcomes.
