With a view to weed out commercial activities under the garb of
charity, the tax department has said any general public service that
involves trade, commerce or business for a consideration will not be
treated as Charity under the Income Tax Act.
Issuing ‘Explanatory Notes to the Provisions of the Finance Act,
2015’, which lists all the amendments that were made to it, the Central
Board of Direct Taxes (CBDT) in a circular gave the definition of
‘charitable
purpose’ as also listing yoga as one of the activities that
will get tax benefit.
“The definition of ‘charitable purpose’ in the I-T Act has been
amended to provide that the advancement of any other object of general
public utility shall not be a charitable purpose, if it involves the
carrying on of any activity in the nature of trade, commerce or
business, or any activity of rendering any service in relation to any
trade, commerce or business, for a cess or fee or any other
consideration..,” the note said.
This is intended to ensure appropriate balance between the object of
preventing business activity in the garb of charity and at the same time
protecting the activities undertaken by the genuine organisation as
part of actual carrying out of the primary purpose of the trust or
institution. “These amendments take effect from April 1, 2016, and will,
accordingly, apply in relation to the assessment year 2016-17 and
subsequent assessment years,” it said.
The explanatory note also provides details of rates of direct taxes,
applicability of minimum alternate tax (MAT) on foreign entities, tax
benefits for Swachh Bharat Kosh and Clean Ganga Fund, besides other
provisions of the Finance Act, 2015, which was approved by Parliament in
May.
As per the circular, 115 JB of Income Tax Act has been amended such
that capital gains arising on transactions in securities; or interest,
royalty or fees for technical services to a foreign company will not be
liable to MAT if such income is credited to the profit and loss account
and the tax payable is less than the rate specified in section 115JB.