FAQs related to Section 10(23C) of the Income Tax Act, 1961

Kopal Jain | Updated: 1 May, 2022

Section 10(23C) of the Income Tax Act, 1961 is a specific exemption available to certain Government and non-government universities and educational qualification.

Q1. Who can claim exemption under Section 10(23C) of the Income Tax Act, 1961?

All government institutions which are wholly or substantially funded by government without any separate approval.
Educational and medical institutions with annual receipts upto 5 crore without obtaining prior approval of Principal Commissioner.
Educational and medical institutions with annual receipts more than 5 crore after obtaining prior approval of Principal Commissioner and fulfillment of prescribed condition.
Any other fund, institution or university after obtaining prior approval of Principal Commissioner and fulfillment of prescribed condition.

Note: Exemption can be claimed u/s 10(23C) only if the institution or fund or university is for charitable purpose and not for profit.

Q2. Is there any condition to claim exemption under Section 10(23C) for Government Institutions or institution substantially funded by Government?

No, there is no condition to be fulfilled by Government institutions and institutions substantially funded by government for claiming exemption under sec 10(23C). They can claim 100% exemption from Income tax without getting any separate approval.

Q3. What if educational or medical institution have total receipts upto 5 crore?

Educational or medical institutions with total receipts upto 5 crore can claim 100% exemption from Income tax without fulfillment of any condition and also separate approval is also not required from Principal Commissioner.

Q4. How exemption can be claimed in case of educational or medical institution having total receipts of more than 5 crore?

In such case, first they need to take separate approval from Principal Commissioner.
If Principal Commissioner gets satisfied after verification, he will grant approval.
Then they have to get themselves registered under section 10(23C).
Such Institutions have to apply at least 85% of its income wholly and exclusively to the objects for which it is established.
Just registration under Section 10(23C) does not result in full exemption. The institution shall spend at least 85% of total income in order to claim full exemption.

Q5. How exemption under Section 10(23C) can be claimed for funds, institutions, universities other than government, educational and medical institutions?

Any fund, institution or university can claim exemption under Section 10(23C) only after getting prior approval from Principal Commissioner. Approval from Principal Commissioner needs to be mandatorily acquired in prescribed form. Furthermore, such funds or institutions have to mandatorily spend at least 85% of total income in order to claim exemption.

Q6. What if 85% of income could not be applied under section 10(23C) or section11?

In this case, assesse can accumulate the deficit of income and the income so accumulated is required to be invested in securities as specified in section 11(5) only.

Q7. What is the benefit of section 10(23C)?

Institutions, Universities registered under Section 10(23C) are fully exempt from Income tax.

Q8. Is registration under section 12A mandatory for claiming exemption under 10(23C)?

No, exemption under Section 10(23C) can be claimed even if you are not registered under section 12A whereas it is mandatory to be registered under section 12A for claiming exemption under section 11.

Q9. Is there any similarity between section 11 and section 10(23C) of Income Tax Act?

Yes, under Section 11, exemption can be claimed only if you apply 85% of your total income to charitable objects. Under Section 10(23C), in case of educational and medical institution having receipts more than 5 crore, this criteria still needs to be fulfilled.

Q10. Which section is more preferable ? Section 11 or Section 10(23C) of the Income Tax Act, 1961 ?

For all funds, institutions or universities having total receipts less than 5 crore, Section 10(23C) is more preferable because you don’t need to fulfill the 85% criteria. It will be fully exempt from Income tax.

Q11. Can entities registered under Section 10(23C) be eligible for CSR funding?

No, for CSR registration, registration under Sec 12A & 80G is mandatory. So, entities registered under section 10(23C) are not eligible for CSR funding.

Q12. What to do if entity registered under 10(23C) wants CSR funding?

In such case, entity have to first surrender their 10(23C) certificate and then have to apply for fresh 12A to be eligible for CSR funding.

Q13. Can entities registered under Section 12A be also eligible for registration under sec 10(23C)?

No, entity can either be registered under Section 12A or under Section 10(23C). Registration under Section 10(23C) is not allowed if you are already registered under Section 12A.

Q14. Is registration under Section 10(23C) a lifetime registration certificate?

No, validity period of registration under Section 10(23C) is of 5 years. After completion of 5 years, it has to mandatorily renewed to avail further exemption.

Q15. What is the validity of fresh registration under Section 10(23C)?

A provisional registration for 3 years will be given to the organizations. The registration once granted shall be valid for 3 years from the A.Y from which the registration is sought. After completion of 3 years, entity have to apply for renewal of registration which shall be valid for 5 years.

Q16. What is the time limit of application of renewal of registration?

Application for renewal of registration needs to be submitted

At least 6 months prior to the expiry of validity period or
Within 6 months from commencement of activities whichever is earlier.

Q17. How approval from Principal Commissioner can be claimed?

Entity need to file form 10A in case of prior approval from Principal Commissioner.

Q18. What are the documents required for registration under sec 10(23C)?

Documental evidence of Creation/ Incorporation in case of a:

Trust– Trust Deed
Society– Registration Certificate and Memorandum of Association (MOA) of the society
PAN card of the organization
Details of members (Aadhaar Card/PAN, Mail Id, Mobile No.)
Annual accounts for the preceding three financial years
Where the income of the entity includes profits and gains of business :
- Annual accounts for the preceding three financial years
- Audit report u/s 44AB for the preceding three financial years
Updated Accounts till the date of application.
Registration under FCRA, if any.
NGO Darpan Registration Id, if any.
Documents evidencing adoption or modification of the objects, if any;
Documents evidencing changes in members, if any;
Notes on the activities of the applicant trust or institution
Copy of order of rejection of application for grant of registration under section 10(23C), as the case may be, if any.
Digital signature of the authorized person

Note: All documents must be self-certified.

Q19. How can we apply for renewal of registration under sec 10(23C)?

We can apply for renewal of registration under sec 10(23C) by filing the form 10AB.