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TMI BlogComprehensive regime for the taxation of "specified income" of registered non-profit organisations (NPOs) : Clause 337 (Table: S. No. 1) of the Income Tax Bill, 2025 Vs. Section 115BBC of the Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... sion and threshold for taxability. This provision is set against the backdrop of the existing Section 115BBC of the Income-tax Act, 1961, which also deals with the taxation of anonymous donations received by certain charitable and religious entities. The evolution from Section 115BBC to Clause 337 represents a shift in legislative approach, with nuanced changes in scope, applicability, and administrative mechanisms. This commentary aims to provide a detailed analysis of Clause 337 (Table: S. No. 1) of the Income Tax Bill, 2025, dissecting its objectives, operative provisions, and practical implications. Further, it will undertake a comparative analysis with the existing Section 115BBC, highlighting similarities, differences, and potential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ymous donation received by a registered non-profit organisation (other than a registered non-profit organisation created or established wholly for religious purposes) excluding the anonymous donations up to Rs. 1,00,000 or 5% of the such donations received by it during the tax year, whichever is higher. The table further specifies that such income shall be taxable in the tax year in which the anonymous donation is received. Key Elements of the Provision * Scope of Applicability: The provision applies to any "registered non-profit organisation" except those created or established wholly for religious purposes. This is a critical limitation, carving out religious entities from the scope of this item. * Definition of Anonymous Donation: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is that NPOs must maintain adequate records to distinguish between anonymous and identifiable donations. Failure to do so could expose the organisation to higher tax liabilities. Potential Issues and Ambiguities * Definition of "Wholly for Religious Purposes": The phrase is not defined, potentially leading to disputes over mixed-purpose organisations (religious-cum-charitable). The absence of a definition may require judicial interpretation or administrative clarification. * Application to Foreign Donations: The provision is silent on whether anonymous donations from foreign sources are treated differently, which could have implications under the Foreign Contribution (Regulation) Act, 2010 (FCRA) and anti-money laundering laws. * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay result in litigation. Judicial precedents u/s 115BBC may provide guidance, but new disputes are likely under the revised framework. Implications for Donors * Donor Anonymity: Donors seeking anonymity may be discouraged, or may channel their contributions through religious-only entities, potentially distorting the charitable sector's funding landscape. * Disclosure Requirements: Donors may need to provide personal information to ensure their contributions are not classified as anonymous, raising privacy concerns. Comparative Analysis: Clause 337 (Table: S. No. 1) vs. Section 115BBC Overview of Section 115BBC Section 115BBC, introduced by the Finance Act, 2006, provides for the taxation of anonymous donations received by certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11 Tax Rate Not specified in Clause 337 itself (presumably to be detailed elsewhere in the Bill) 30% on excess anonymous donations Definition of Religious Purpose Not defined; exclusion for "wholly for religious purposes" Explicitly excludes wholly religious institutions and provides for religious-cum-charitable institutions with caveats Specificity of Institutions Applies to all registered non-profit organisations, subject to exclusion Limited to institutions specified in section 10(23C) and section 11 Computation of Threshold Based on anonymous donations only Based on total donations received Record-Keeping Requirements Implied, but not detailed in the provision Explicit requirement to maintain name, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplexity: The broader scope of Clause 337 may increase compliance and enforcement complexities, particularly for smaller NPOs. Practical Implications of the Proposed Reform For Non-Profit Sector * A broader range of NPOs may be subject to scrutiny and taxation on anonymous donations. * Compliance obligations are likely to increase, with a greater emphasis on donor due diligence and record-keeping. * Organisations with mixed objects may face interpretational challenges in determining their status for the purposes of the exclusion. For Donors * Donors may need to provide more personal information to avoid their contributions being taxed as anonymous, potentially affecting privacy and willingness to donate. * Religious donors may ..... X X X X Extracts X X X X X X X X Extracts X X X X
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