Tax experts have confirmed that religious institutions like churches, temples and mosques have to file tax-returns every year under the law even as Archdiocese of Goa and Daman was the first to be asked by tax authorities to furnish the details about its cash balances.
OPPN IS MISGUIDING
CATHOLICS: CABRAL
>> See pg 3
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RELIGION, TAX AND PRIVILEGES
* All religious institutions are treated equally under I-T law
* Church, temple, mosque and others have to file returns every year
* I-T officials have the authority to ask for income disclosure
* Religious institutions get privilege of tax exemption
* They have to prove 85% of yearly spending on their stated objects
* Remaining 15% of expenditure is carried forward without attracting tax
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It was also confirmed that the income tax officials have the authority to ask any religious institution to give disclosures of its income. Although religious institutions have to file tax returns, they can avail tax exemptions by getting registered and meeting certain conditions.
A prominent chartered accountant from Panaji said, “Religious, charitable and educational institutions have to be registered under income tax to avail exemptions. If they aren’t registered, they will be taxed like any individual and their income may attract upto 30% tax.”
First and foremost, under the law, all religious institutions, regardless of which religion they belong to, are treated equally. Second, the privilege of tax exemption of income is given not only to religious, but also to charitable and educational institutions. These exemptions are granted because such institutions work towards the betterment of society and not for profit motive.
So, how exactly these institutions, including religious, can avail of tax exemptions? Under the income-tax act, such institutions have to prove that they spent 85% of yearly income on their stated objects and then the remaining 15% is carried forward without paying tax.
Tax experts, however, cautioned that the commissioner of income tax can cancel the registration of any such institution if they aren’t working towards their objects.
Religious institutions make income by way of donations, income from house property, interest on deposits or any dummy collections. Of such total income, 85% must be spent on objects of institutions like salary of a priest or a pandit and etc.
In case, a religious institution is not able to spend 85%, then the gap between 85% of its income and what is actually spent is taxable. Suppose, a religious institution could spend only 60% of income on objects, then the balance 25% is taxable.
However, the tax on this 25% can get exempted too, if the religious institution gives a prior notice to the income tax department saying that it will spend this money on its objects over next five years.
Meanwhile, religious institutions get a PAN card from tax authorities. Like anyone, they too have to file tax-returns every year before September 30th. Like any business, they too have to maintain books of accounts because tax authorities may check these books anytime.
Religious institutions even have to get their books audited from a chartered accountant if their annual gross receipts are more than Rs 2.5 lakhs.
