Every community needs its healers, teachers, and helpers. Across India, thousands of charities run schools, clinics, & shelters without chasing profit. To keep that spirit alive, the Income Tax Act offers them a break — full tax relief under Section 10(23B).
This rule says: if you spend your income on people, not profits, the government won’t tax it.
Here’s how it really works.
What Exactly Is Section 10(23B)?
Section 10(23B) sits inside Chapter III – Incomes Not Included in Total Income.
It exempts the income of any public charitable institution created for social welfare — whether it runs a hospital, educates children, or supports disadvantaged groups.
It mainly covers work for
- relief of the poor
- education & medical aid
- women and child development
- uplift of SC/ST & other marginalised communities
In short: if your funds circle back to society, not to private pockets, they can stay untaxed.
Who Can Use This Section?
To qualify, an organisation must:
- Be a public charitable trust or society – officially registered with a not-for-profit clause.
- Hold Central Government approval – published through a Gazette notification.
- Work for public benefit, not select families or members.
- Avoid profit distribution – income can’t end up as personal gain.
When these fit, the entire income of the trust may be exempt.
Also Read: Registration & Tax Benefits for Charitable Trusts
Essential Conditions
- Spend earnings only on the stated cause.
- Keep trustees and founders out of benefit.
- Maintain audited books & submit annual reports.
- File everything on time with the department.
Miss these, and the exemption can vanish quickly.
Validity Period
The approval lasts no more than three years at once.
After that, the trust reapplies.
This short cycle lets the government check that activities remain genuine & transparent.
How to Get the Exemption Certificate
- Apply to the CIT/DIT (Exemptions) with details on aims, projects, and finances.
- Attach registration deed, audited statements, and activity proofs."
- The authority verifies authenticity.
- On satisfaction, the Central Government issues approval for up to three years.
Renewal Process
Before the certificate expires, apply again with
- latest financials,
- updates on charitable work, and
- a declaration of no personal benefit.
Smooth renewals go to trusts that stay compliant & transparent.
Courts on “Technical Errors”
Judgments say exemption u/s 10(23B) can’t be denied just because of a small procedural miss.
If the charity genuinely serves society, late paperwork shouldn’t cancel relief.
The law values intent & impact more than formality.
Also Read: The Rule That Governs Voluntary Contributions to Trusts
10(23B) vs 12A – Quick Difference
|
Point |
Section 10(23B) |
|
|
Authority |
Central Government |
Income Tax Dept |
|
Duration |
Max 3 years |
Till cancelled |
|
Focus |
Public charities for SC/ST/Women |
All charitable & religious bodies |
|
Renewal |
Mandatory every 3 yrs |
Not required |
Why Charities Love 10(23B)
- Full tax-free income on approved funds
- Extra financial breathing space
- Better trust among donors & CSR partners
- Easier access to grants
- Less red-tape questioning from officials
Every saved rupee can feed or educate someone.
When Applications Fail
Common red flags:
- Purpose not clearly charitable
- Income diverted to individuals
- Un-audited or opaque accounts
- Political or business influence
Clarity & openness keep approvals safe.
Example in Action
“Swasthya Foundation,” a rural medical NGO, earns ₹ 30 lakh from donations and interest.
It spends the full amount on hospital camps & medicines.
Result → Entire income exempt under 10(23B).
If it uses funds for personal trips or campaigns, exemption ends immediately.
Also Read: Tax Exemption for Educational and Medical Institutions
Compliance Checklist
- Maintain daily books of accounts
- Get an annual CA audit
- File returns on schedule
- Report activities to the IT Department
Compliance isn’t just paperwork — it’s credibility.
Government Oversight
Since approval cycles every three years, officials can step in if misuse appears."
They can withdraw the benefit & reassess taxes from past years.
That keeps the ecosystem clean.
Key Takeaways
- Section 10(23B) exempts income of approved public charitable trusts.
- Approval comes from the Central Government, valid ≤ 3 years.
- Minor technical errors don’t kill genuine exemptions.
- The rule balances tax fairness & public good.
Conclusion
Section 10(23B) is more than a clause — it’s a bridge between law & compassion. It lets honest NGOs keep their focus on people, not paperwork. Stay transparent, renew on time, and the benefit continues to power your cause.
Running an NGO or welfare trust?
👉 Visit CallMyCA.com — our CA experts handle registration, renewal, and audit so your organisation keeps its Section 10(23B) tax exemption hassle-free.
