Large Educational Trusts at Risk of Losing Tax Exemption

Income Tax

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Oct 29, 2022

Several high net worth charities and trusts run the risk of losing their tax-exempt status, owing to two recent Supreme Court (SC) rulings, unless they undertake suitable internal restructuring, tax experts said. However, since the rulings are prospective in operation, these entities won’t need to pay higher amounts as taxes, for this reason, for past periods.
In a ruling on October 19,2022 the SC held that educational institutions or trusts can claim benefits of tax exemptions only if they ‘solely’ engage in education and not in any other activity of profit. For this, they cannot even have objects unrelated to education, the apex court ruled, adding that if the objective of an institution appeared to be profit-oriented, such institutions could not get approval under Section 10(23C) of the Income Tax Act.

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