Return of income.

349

Where the total income of a registered non-profit organisation, without giving effect to the provisions of this Part, exceeds the maximum amount which is not chargeable to income-tax in any tax year, it shall furnish the return of income for such tax year as per the provisions of section 263(1)(a)(iii), within the time limit allowed under sub-section (1)(b) of that section.

Explanation

Section Summary:

Section 349 of the new income tax law mandates that registered non-profit organisations (NPOs) must file a return of income if their total income, before applying any exemptions or deductions under this Part of the law, exceeds the maximum amount not chargeable to income tax in a given tax year. This ensures that NPOs with significant income comply with tax filing requirements, even if they are eligible for tax exemptions.

Key Changes:

• Clarification on Filing Threshold: Unlike the previous law, which may have been ambiguous about when NPOs need to file returns, this section explicitly states that NPOs must file if their income exceeds the basic exemption limit, regardless of whether they qualify for tax exemptions.
• Reference to Section 263(1)(a)(iii): The section ties the filing requirement to the provisions of Section 263(1)(a)(iii), which specifies the conditions under which returns must be filed.

Practical Implications:

• For NPOs: NPOs must now carefully calculate their total income without considering any exemptions or deductions under this Part of the law. If this amount exceeds the basic exemption limit, they are required to file a return of income.
• Compliance Burden: This increases the compliance burden for NPOs, as they must ensure accurate income calculations and timely filing, even if they ultimately owe no tax due to exemptions.
• Audit and Scrutiny: NPOs with higher income may face greater scrutiny from tax authorities, as their returns will now be on record.

Critical Concepts:

• Total Income Without Exemptions: This refers to the gross income of the NPO before applying any tax exemptions or deductions available under this Part of the law.
• Maximum Amount Not Chargeable to Tax: This is the basic exemption limit, which varies depending on the taxpayer category. For NPOs, this is typically the threshold below which no tax is levied.
• Section 263(1)(a)(iii): This section outlines the conditions under which taxpayers, including NPOs, must file returns. It specifies the timelines and forms to be used.

Compliance Steps:

1. Calculate Total Income: Determine the NPO's total income for the tax year without applying any exemptions or deductions under this Part.
2. Compare with Exemption Limit: Check if this income exceeds the maximum amount not chargeable to tax.
3. File Return if Required: If the income exceeds the threshold, file the return of income as per Section 263(1)(a)(iii) within the prescribed time limit.
4. Maintain Documentation: Keep records of income calculations and supporting documents to substantiate the return.

Examples:

• Scenario 1: An NPO has a total income of ₹3,00,000 before applying any exemptions. The basic exemption limit for the year is ₹2,50,000. Since the income exceeds the limit, the NPO must file a return of income.
• Scenario 2: Another NPO has a total income of ₹2,00,000 before exemptions. Since this is below the exemption limit of ₹2,50,000, the NPO is not required to file a return under this section.

This section ensures that NPOs with significant income remain transparent and compliant, even if they are eligible for tax exemptions.