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saju sathyadevan (na)     01 October 2016

Medical assistance to members of an association registered u/s 12a of income tax act

An association with about 500 members is registered u/s 12A of IT Act. It is running an educational institution with an annual income of above 1 crore and above 85% of income is spend in school itself. My query is a. Can the association provide medical relief to its "members" out of the 15% balance income of the school, if it is passed by the General Body. If yes, what will be its impact on tax as per IT Act. b. Does the Educational Institution should possess a separate PAN apart from the association or it should have to merge its income with the association and file ITR by association? c. Which ITR has to be filed and what is its last date?


 4 Replies

Ms.Usha Kapoor (CEO)     02 October 2016

Dear Client,

                As PER LATEST PROVISIONS O F IT Act  sECTION 139(4)(c)  If  YOUR TOTAL INCOME NOT CHARGEABLE TO TAX EXCEEDS  1 LAKH RUPEES before cclaiming EXEMPTION UNDER  SECTION 10 YOUR TOTAL annual turnover exceeeds 1 crore rupees al;though  a major chunk of your income (85%) you apply for expenditure on educatrion ansd the balamnce on provi8ding medical releief  or benefits to your 500 members before claiming exewmptiom under sectrion 10  your your total income  not chargeable  to tax exceeds 1 lakh rupees(after meeting you r expenditure on school and Medical  expemnses for 500 mebers) you need to file ITR form 7 return to claim exemption .If you appreciate this  answer please click thank you button on this forum..

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saju sathyadevan (na)     02 October 2016

Ms. Usha Kapoor,

Thanks to know that I have to file ITR 7. But, my worrying question is whether the association can provide relief to its Members. Because after going through the act and other articles I came to know that out of the total income of the educational institution 85% and more has to be spend on the said institution itself and the balance has to be reserved in corpus fund itself to be spend for the institution in the coming years. Nowhere I had came across as to the amount can be spent for its members also. Please clarify.

Ms.Usha Kapoor (CEO)     02 October 2016

Yeah! As stated by you-you   said 15 % income we'd like to spend for  medical relief to  our  500 members. But /According to the act  providing medical releif  for the poor, opening charitable Hospitals, and quality Instituions o fHelath cARE ETC  AT LOW COST FOR  POOR AND MIDDLE CLASS PEOPLE QUALIFY FOR   T.AX SPOPS. sINCE 15%  OF YOUR  ANNUAL  TURN OVER YOU SAID WOULD BE PROVIDING MEDICAL RELEIF TO YOUR OWN  MEMBERS DO NOT QUlify for  exemption. You get your accounts audited every year  and also get  registered under  section12 AA for more tax sops and rebates. Then  one time approval  of 'chief Commssioner of CBDT would be enough to enjoy   permanent  eligibility for tax exemptions. If you appreciate this  reply please cxlick the thank you  button on this  forum.. Your main objectis  or principal object is  education if other incidental objectives are there such as medical releif for  the poor that also would qualify for tax exemption.

Ms.Usha Kapoor (CEO)     02 October 2016

Dear Client,

Please let me know who are your members? Are they educated with  sufficientincome of there own? In  which  case  you doo  not qualify fo r tax rebaeor exemption. If they  ARE UNDERPRIVILEGED MEMBERS OF THE SOCIETY, DOWNTRODDEN ETC WOULD QUALIFY FOR EXEMPTION..Anyway your  annual  turnoverexxceeds 1 crore rupees and hence you need to file form ITR 7.


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