New Delhi, June 16: The government today proposed to establish a tax exemption threshold limit beyond which the income of non-profit organisations (NPOs) will be brought under the tax net.
“A basic exemption limit will be provided and the surplus in excess of such limit will be subject to tax,” said the revised Direct Taxes Code (DTC), on which the government has invited public comments till June 30.
The revised proposals, however, clarified that public religious charitable institutions would continue to be tax exempt, provided they satisfy conditions prescribed under the code.
Under the code, it also proposed that 15 per cent of surplus or 10 per cent of gross receipts, whichever is higher, would be allowed to be carried forward to be used within three years from the end of the financial year.
It has also proposed to retain the definition of activities pursued by the NPOs as ‘charitable purposes’, rather than ‘permitted welfare activity’ to “maintain continuity and minimise litigation”.
The DTC also retained the cash system of accounting, since it is easy to follow and administer and proposed that the central government would have the power to notify any NPO of public importance as an exempt entity.
“The finer details under the DTC would have to be examined to understand the categorisation and taxability accordingly,” KPMG India Partner Vikas Vasal said.
The government received 1,600 representations on the first draft and has asked all stakeholders to give their views on the revised draft by end of this month.
–PTI