In order to promote reinvestment of business profits in areas where massive capital input is required for socio-economic development, a tax incentive has been provided under Section 35AC of the Income Tax Act, 1961 allowing for full deduction of the entire amount paid by a taxpayer carrying on a business or profession for financing projects or schemes promoting social and economic welfare. In the case of other taxpayers, the deduction is allowed under section 80GGA from his gross total income.
Who can undertake eligible projects and schemes
- an association
- an institution
- a public sector company
- a local authority
- A company, which is a taxpayer may avail of this deduction either by way of payment to the above mentioned entities or directly by undertaking an eligible project or scheme.
Conditions necessary for approval
- the association or institution is;
- constituted as a public charitable trust.
- registered under the Societies Registration Act, 1860 (Act 21 or 1860) or under any law corresponding to that Act.
- registered under section 25 of the Companies Act, 1956 (Act 1 of 1956).
- Persons managing the affairs of the association or institution are persons of proven integrity;
- the activities of the association or institution are open to citizens of India without any distinction and are not for the benefit of any individual or community;
- the association or institution maintains regular accounts of its receipts and expenditure;
- the instrument or the rules or regulations governing the association or institution do not contain any provision for the transfer or application at any time, of the whole or any part of its income or assets for any purpose other than a charitable purpose.
What is an eligible project or scheme
An eligible project or scheme is one, which the Central Government on the recommendation of the National Committee, may so notify in the Official Gazette. It should relate to one or more of the following:-
- construction and maintenance of drinking water projects in rural areas and in urban slums, including installation of pump-sets, digging of wells, tube wells and laying of pipes for supply of drinking water;
- construction of dwelling units for the economically weaker sections;
- construction of school buildings primarily for children belonging to the economically weaker sections of the society;
- establishment and running of non-conventional and renewable sources of energy systems;
- construction and maintenance of bridges, public highways and other roads;
- Promotion of sports;
- Pollution control;
- Any other programme for uplift of the rural poor or the urban slum dwellers, as the National Committee may consider fit for support, like:-
- Family welfare and immunization.
- Tree plantation
- Social forestry
- Development of irrigation resources
- Rural sanitation-construction of low –cost latrines
- Medical camps in rural areas
- Rural health programmes
- Land development and reclamation of waste land or degraded land with special emphasis on ecological improvement
- Soil and water conservation including harvesting of run off water
- Non-formal education and literacy, especially for women & children
- Rural non-farm activities
- Creation of employment opportunities for urban and rural population living below the poverty line
- Supportive services for women to engage in productive work (care of children of working women by providing an improved environment, care and food and by establishing crèches/balwadis, etc.)
- Leprosy eradication
Functions of the National Committee
The Central Government has constituted this Committee with the following functions:
- To approve associations and institutions for the purpose of carrying out any eligible project or scheme; and
- To recommend to the Central Government projects and scheme of any company including a public sector company, a local authority or an approved association or institution, for being notified as eligible projects or scheme.
The Deputy Secretary National Committee for Promotion of Social and Economic Welfare. Department of Revenue, Ministry of Finance, Room No.266A, North Block , New Delhi 110001 Phone : 011-23092598, 23093907 Fax : 011-23093118
Application for approval of an association or institution
The application for approval of an association or institution should contain the following particulars and documents:-
- Name, address and status of applicant, the district/ward/circle where assessed, Permanent Account Number, audited balance sheet and profit and loss account or income and expenditure account for three years including the latest year;
- Name and address of the association or institution along with trust deed, rules and regulations, memorandum of association etc. and registration certificate, if any;
- Names and addresses of the persons managing the affairs of the association or institution, including the names of such persons for last three years;
- If notified, u/s 10(23C) (iv) or (v) of the Income Tax Act, 1961 or approved under section 80G, the particulars thereof;
- Brief particulars of the activities of the association or institution during the last three years.
Application for recommendation of project or scheme
The application for recommendation of a project or scheme for being notified as an eligible project or scheme should contain the following particulars and documents:-
- Name, address and status of applicant, the district/ ward/circle where assessed, Permanent Account Number, audited balance sheet and profit and loss account or income and expenditure account for three years including the latest year;
- Title of project or scheme, date of commencement, duration and the likely date of completion;
- Estimated cost of the project or scheme duly supported by a copy of the resolution of the Managing Committee of the association/institution/the local authority/the Board of Directors of the company;
- Category or class of persons, who are likely to be benefited from the projects or scheme;
- Affirmation that no benefit from the project or scheme will accrue to persons managing the association or institution;
- Where the project or scheme is to be executed by a company, information about whether the project or scheme is such, which the company is required to execute under any law or under agreement with employees or otherwise.
Application for recommendation of project or scheme The Committee
- Will make further enquiries as deemed fit before making its decision on an application.
- Accord its approval for a period not extending beyond 3 years at a time.
- Review progress of projects that extend beyond 3 years before according further approval.
- Ensure that in the case of a company, adequate arrangements have been made for divesting itself of the ownership of the capital asset acquired or erected for the purpose of the project or scheme.