Under the following circumstances exemption from Tax is not available for NGO’s
I. Income of Private Trusts
II. Income of institutions formed for the benefit of a particular religion, caste or community except institutions formed for the benefit of Scheduled castes, Scheduled tribes, Backward Classes, women and children.
III. Where income of the trust or institution is used directly or indirectly for the benefit of the author, founder, manager or relative of such a person.
However, there is no bar on paying a reasonable remuneration depending on the facts and circumstances of the caste.
I. For any income derived from unauthorized investments or from shares in companies.
II. Income derived from a business which is not incidental to the objects of the institution or where no separate books are kept with respect to a business carried on by the institution.
VIII. Withdrawal of Exemption
The Finance Act, 2002 has given powers to the Central Government to withdraw recognition granted to (i) Scientific Research Associations u/s 10(21) (ii) News Agency u/s 10 (22B) (iii)Professional Institutes, Medical Council, Bar Council, etc. u/s10(23A) (iv) Khadi and Village Industries u/s 10(23B) and (v) university, educational institutions, hospitals etc. u/s 10(23C) if the Government or Prescribed Authority finds that-
(a) Institution has not applied its income or accumulated its income for the purpose for which recognition was given.
(b) Institution has not invested or deposited its funds in accordance with the requirements of the relevant section.
(c) Activities of the Institution are not genuine : or
(d) Activities are not carried on in accordance with all or any of the conditions laid down at the time of granting recognition
The above action can be taken at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust etc. (applicable from the assessment year 2003-04).