In 2022, a pivotal Supreme Court ruling reshaped the tax landscape for charitable organizations, clarifying their obligations on income beyond donations. Nitin Gupta, Chairman of the Central Board of Direct Taxes, explained that assessing officers would now distinguish normal from abnormal business components, determining tax liability accordingly. The ruling challenges charities, particularly those engaged in general public utility (GPU), limiting their non-grant income to 20%, even within which revenue must be earned on a cost-to-cost basis. Rejecting the plough-back theory, the court emphasized that commercial income compromises charitable character. Experts seek clarity for charities navigating fee-based income, urging recognition of their societal contributions.
Supreme Court Decision Brings Clarity to Tax Obligations for Charities Generating Income
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