Now, the taxman eyes private schools, colleges
NEWDELHI:The government’s allout war on black money has thrown up an interesting statistic — apart from real estate, an obvious suspect, the biggest repository of untaxed money are educational institutions.
Having established the fact to its own satisfaction, the government now wants to treat private educational institutions on par with commercial establishments, and impose tax on them.
At present, most private educational institutions are registered as charitable trusts and run on the not-for-profit model.
Government data accessed by HT shows that there has been a 204% increase in income tax raids in the first quarter of this financial year from 41 in April-June last year to 125 this year.
The increase in raids have also led to a 140% increase in cash and jewellery seizures, to ₹180 crore compared to ₹75 crore in AprilJune 2015. Of this, the biggest haul — ₹80 crore in cash — was from a private medical college in Chennai, a senior tax official said.
“The increase in tax raids is because of better analysis by taxmen. This is in keeping with the government’s crackdown on black money” said a top functionary in the finance ministry
”Most private institutions charge huge capitation fees during admissions and there are no records for these payments. So obviously, they are not paying tax on it,” the official said.
Educational institutions are registered as trusts of charities in India, and 85% of their income is exempt from tax. “The remaining 15% can also be exempt if certain I-T Act provisions are followed by these trusts. These can easily be done by maintaining accounts in a certain way,” an official in the ministry of corporate affairs explained.
The tax department has put the facts before the government. “All educational institutions running on commercial lines should be taxed,” said the tax officer quoted earlier. Under section 12A of the I-T Act, the taxman can cancel registrations of trusts if they are found flouting the principles of ‘charitable purpose of trusts’.