Section 133 of the Income-tax Act, 2025 provides for tax deduction on donations made to certain approved institutions, including Universities and educational institutions of national eminence. This comprehensive guide covers the approval process, eligibility criteria, and compliance requirements for educational institutions seeking approval under Section 133.
The Statutory Framework Under Section 133
Section 133(1)(a)(vii) provides that in computing the total income of an assessee, there shall be deducted the whole of the aggregate of the sum or the sums paid by the assessee, in the tax year as donations to a University or any educational institution of national eminence as may be approved by the prescribed authority in this behalf.
Section 133(2) provides that where the aggregate of the sums referred to in sub-section (1)(a)(xxiii) and (xxiv), and sub-section (1)(b)(ii) to (vi) exceeds 10% of the adjusted gross total income, then the amount in excess of 10% of the adjusted gross total income shall be ignored for the purpose of computing the aggregate of the sums in respect of which deduction is to be allowed.
Section 133(3) provides that where deduction under this section is claimed and allowed for any tax year in respect of any sum specified in sub-section (1), the sum in respect of which deduction is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other tax year.
Prescribed Authority for Approval
Rule 63 provides that for the purpose of section 133(1)(a)(vii), the prescribed authority for granting of approval shall be the Principal Chief Commissioner of Income-tax (Exemptions). The prescribed authority shall grant approval with the concurrence of the Secretary, University Grants Commission for a University or any non-technical institution of national eminence, and the Secretary, All India Council of Technical Education for any technical institution of national eminence.
The University Grants Commission (UGC) is established under section 4 of the University Grants Commission Act, 1956. The All India Council of Technical Education (AICTE) is established under section 3 of the All India Council for Technical Education Act, 1987.
Eligibility Criteria
For Universities
A University seeking approval under Section 133 must be a University established or incorporated by or under a Central, State or Provincial Act. The University must be of national eminence, which is assessed based on its academic reputation, research output, quality of faculty, and contribution to education.
The prescribed authority with the concurrence of the Secretary, University Grants Commission shall determine whether the University qualifies as an institution of national eminence. The factors considered include the University's ranking, accreditation, research publications, and overall academic standing.
For Educational Institutions
Educational institutions seeking approval must be of national eminence. For non-technical institutions, the approval is granted with the concurrence of the Secretary, UGC. For technical institutions, the approval is granted with the concurrence of the Secretary, AICTE.
The institution must have a proven record of academic excellence, quality infrastructure, qualified faculty, and contribution to the field of education. The institution must also comply with all applicable laws and regulations.
Approval Procedure
Rule 63 provides that the prescribed authority shall grant approval with the concurrence of the relevant authority. The Principal Chief Commissioner of Income-tax (Exemptions) is the prescribed authority. The application process involves submission to the prescribed authority, which then seeks concurrence from the UGC or AICTE.
The approval is granted for a specified period and may be renewed subject to continued compliance with the conditions. The approval can be withdrawn if the institution ceases to meet the eligibility criteria or violates the conditions of approval.
Conditions for Approval
The institution must be of national eminence, as determined by the prescribed authority with the concurrence of the UGC or AICTE. The institution must comply with all applicable laws and regulations, maintain proper records of donations received and utilised, and apply the donations for the purposes for which the institution is established.
The institution must not use the donations for any purpose other than the educational purposes for which it is established. The institution must maintain separate accounts for donations received and ensure that the donations are utilised in accordance with the conditions of approval.
Donation Deduction Under Section 133
Donations made to approved Universities and educational institutions are eligible for deduction under Section 133(1)(a)(vii). The deduction is available for donations made by any assessee, subject to the overall limit of 10% of the adjusted gross total income.
The donation must be made by way of a sum of money. Any deduction for a donation over ₹2,000 shall be allowed only if the payment is made by a mode other than cash. The donor must obtain a receipt from the institution specifying the amount of donation.
The claim of deduction by the assessee in his return of income shall be allowed only on the basis of the information relating to such donation furnished by such institution to the prescribed authority or person authorised by such authority, and subject to verification as per the risk management strategy formulated by the Board.
Compliance Requirements for Institutions
Approved Universities and educational institutions must maintain regular accounts of their receipts and expenditure. They must prepare such statement for such period, as may be prescribed, and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time, as may be prescribed.
They must deliver to the prescribed authority a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement. They must furnish a certificate to the donor specifying the amount of donation within such period from the date of receipt of the donation containing the requisite particulars in manner, as may be prescribed.
Rule 190 provides that the statement of particulars required to be furnished by any registered non-profit organisation or a person referred to in Schedule VII (Table: Sl. No. 1) under section 354(1)(e) or (f) shall be furnished in respect of each financial year, in Form No. 113. The certificate to the donor shall be furnished in Form No. 114.
The statement of particulars shall be furnished on or before the 31st May, immediately following the financial year in which the donation is received. The certificate to the donor shall be furnished on or before the 31st May, immediately following the financial year in which the donation is received.
Penalties for Non-Compliance
Section 464 provides that the Assessing Officer may impose a penalty which shall not be less than ₹10,000 but which may extend up to ₹1,00,000 on the research association, university, college or other institution referred to in section 45, if it fails to deliver or furnish the documents as may be prescribed under section 45(4)(a). Section 429 provides that where the institution or fund fails to deliver or cause to be delivered a statement under section 354(1)(e) within the time prescribed, it shall be liable to pay, by way of fee, a sum of ₹200 for every day during which the failure continues.
Best Practices for Educational Institutions
Educational institutions seeking approval under Section 133 should ensure compliance with all eligibility criteria and maintain proper documentation of their activities. The institution should maintain separate accounts for donations received and ensure that the donations are utilised only for the purposes for which the institution is established.
The institution should file the required statements and certificates within the prescribed time limits. The institution should also ensure that the donations are properly receipted and that the donors are provided with the required certificates.
Regular review of compliance with the conditions of approval should be conducted, and any issues should be addressed promptly. The institution should also maintain proper records of its activities to demonstrate its standing as an institution of national eminence.
Disclaimer: This article provides general information and does not constitute legal advice. For specific guidance on University and educational institution tax approval under Section 133, please consult qualified legal and tax professionals.
Need Expert Legal Guidance?
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