B. Bala Krishna, IRS, Commissioner of Income Tax (Exemptions), explains various issues, including those involving charitable organizations engaged in education, medical, and health service activities, capital gains tax, the filing of returns, the process of obtaining refunds, and Chartered Accountants’ outreach programs, in an interview with the Prime Post. Excerpts from his interview follow.
Prime Post: The charity organizations are coming out hundreds of hundreds in the two Telugu states. What are your suggestions to them?
Commissioner: Public charitable trusts and societies that seek to promote charitable activities are mandatorily required to obtain registration with the Income Tax Department. Similarly, educational and medical institutions that are solely involved in charitable activities and wish to claim tax exemptions are also required to obtain this registration under the relevant exemption provisions of the Act.
The exemption granted is subject to the fulfilment of certain conditions, such as maintenance of books of account and other essential records, auditing of these accounts, filing of the audit report and filing of the statement of accumulation (or application of income). Ensure that investments are maintained only in specified modes and forms as prescribed by the Act. These reports and the return of income must be filed before the prescribed due dates every year.
PP: The charity organizations are in confusion regarding how to deal with the 80G certificates for eligible donors. The Income Tax (IT) Department has made several changes to the process. Could you please clarify these doubts for them?
Commissioner: Non-profit organizations that are duly approved under Section 80G by the Income Tax Department are the only organizations eligible to issue 80G certificates to eligible donors. The IT Department introduced many changes to the procedures and laws, effective April 1, 2021, to leverage technology, such as the online issue of provisional registration, regular registration, and re-registrations. For educational institutions including those substantially supported by the government and private educational institutions where the annual gross receipts are below Rs.5 crore per annum although they are not required to obtain registration, they are required to file their returns of income every year. Non-Profit Organizations (NPOs) approved under Section 80G shall file the annual statement on or before 31st May in the following year; only then are the donors eligible to claim their donations as a deduction from their taxable income.
PP: What are the provisions in the IT Act on receiving donations from anonymous persons or organizations?
Commissioner: Anonymous donations received by charitable organizations which are into the promotion of education and medical facilities are subject to a 30 percent tax straight away.
PP: What are the measures to be taken against organizations that have not complied with the IT provisions?
Commissioner: Failure to comply with the time-bound manner for the application for registration or re-registration under Section 12AB of the Income Tax Act, 1961, may lead to serious consequences. If a charitable trust or institution loses its registration (or if the application for re-registration is rejected or not filed in time), it is deemed to have been converted into a non-charitable form, which triggers a levy of tax on its accreted income under Section 115TD (commonly referred to as Exit Tax). The Exit Tax is levied on the accreted income (the fair market value of total assets less total liabilities as on the specified date). The Exit Tax is charged at the Maximum Marginal Rate (MMR) applicable to an individual or an Association of Persons (AOP), which, including surcharge and cess, is generally the highest slab rate in force.
In addition to the Exit Tax on the accreted income, the income of the trust for the relevant year (for which the exemption under Sections 11 and 12 is lost) will be subjected to taxation under the normal provisions, often at the rates applicable to a Maximum Marginal Rate (MMR) trust or an Association of Persons (AOP) if the circumstances of its income and beneficiaries apply.
PP: What is your advice to Non-Profit Organizations (NPOs) on the spending and utilization of donations?
Commissioner: Non-Profit Organizations (NPOs) are advised to utilize the funds only for the objectives as mentioned in the original registration deed, and not for any other purposes. Further, in case a specific violation is noticed in the conduct of the NPO, the IT Commissioner (Exemptions) can cancel the entity’s registration and enforce taxation.
PP: There is a lot of confusion among Associations of Persons (AOPs) who are running charitable organizations and wish to open a new one. Does the IT Department have any mechanism for this?
Commissioner: The Income Tax Department’s Exemptions charge for the Telangana and Andhra Pradesh Region is headed by the Commissioner of Income Tax (Exemptions) at Aayakar Bhavan, Basheerbagh, Hyderabad. For registration and information regarding charitable activities, individuals can contact the Public Relations Officer (PRO) at the Income Tax Towers, A.C. Guards, Hyderabad.
PP: What is the present trend among the public regarding donations to charitable organizations?
Commissioner: Post-Covid and after 2021 amendments many voluntary organizations came forward to register themselves as NPOs and to carry the charity activities. Interestingly, there is also a trend that many donors coming forward to donate some charity activities and looking for genuine organisations. The newly introduced CSR (Corporate Social Responsibility) donations also enhanced the contributions towards charity activities.
PP: What proactive measures is the Hyderabad circle planning to take to resolve the recurring confusion among Chartered Accountants regarding the correct ITR form to be used by assessees with complex income sources (e.g., salary, multiple capital gains, and proprietary business) for the current Assessment Year?
Commissioner: IT department is planning to organize Chartered Accountant (CA) outreach program with the stakeholders in the light of new IT Act-2025, which will be effective April 1, 2026. The aim is to create sufficient awareness for them. It will be conducted different cities in both Telugu states. The department I & R is releasing different awareness videos and audio from time to time to help the general public.
PP: What do you say about the recent changes in capital gain tax (CGT) in the holding periods, indexation benefit removal, and rationalized tax rates?
Commissioner: CGT the taxation is brought down to very reasonable 12.5 percent from earlier 20 percent after indexation. This rate is very rational and found to be beneficial to the assessee, who desired income from the sale of capital assets.
PP: What is your suggestion to IT employees regarding filing their individual returns and concerns about delays in receiving tax refunds?
Commissioner: The primary suggestion for IT employees seeking a quick tax refund is to focus on accuracy and timely e-verification of their return and to make only genuine claims. Since salaried income is largely captured through Form 16, their returns are naturally simpler and can be processed in few days if there are no data discrepancies.
Editor, Prime Post
Ravindra Seshu Amaravadi, is a senior journalist with 38 years of experience in Telugu, English news papers and electronic media. He worked in Udayam as a sub-editor and reporter. Later, he was associated with Andhra Pradesh Times, Gemini news, Deccan Chronicle, HMTV and The Hans India. Earlier, he was involved in the research work of All India Kisan Sabha on suicides of cotton farmers. In Deccan Chronicle, he exposed the problems of subabul and chilli farmers and malpractices that took place in various government departments.
It is learnt that N P O (Non Profitable Organisations should be approved under 80G to get Tax Exemption and CGT Central Government taxation is brought down to 12.5 percent which is very low. It’s a worthy item.