Income Tax Exemption To District Mineral Foundation

The Central Board of Direct Taxes (i.e., CBDT), vide notification no. 73/2020- Income Tax dated 10

th September 2020, exempted certain specified income derived by the District Mineral Foundation Trust. The exemption is briefly explained in the current article.

Understanding the District Mineral Foundation

Before going through the exemption available, it is essential to understand the term ‘District Mineral Foundation’. Notably, the Mines and Minerals (Development & Regulation) Amendment Act, 2015 mandates setting up of the District Mineral Foundations in all the districts of the country which are affected by the mining related operations. Fundamentally, District Mineral Foundation is a trust which is set up as a non-profit body. The foundation is set up in those districts affected by the mining works. The Foundation works for the interest and benefits of the persons and areas affected by the mining related operations. The Foundation receives the funds from the contributions from the miners.

Available exemption

Based on the powers available under section 10(46) of the Income Tax Act, 1961, the Central Government exempts the specified income of the District Mineral Foundation Trust. The types of income and number of years to which the exemption is available are explained hereunder. Following types of incomes are exempted-

Contribution by the lease holder to the District Mineral Foundation.
Interest received from the lease holders towards late payment.
Any amount of penalty charged to the lease holders.
Interest income from fund available under District Mineral Foundation.
Interest income received from the Saving Bank Account.
Interest income received on excess fund invested in a term deposit.

Exemption under section 10(46) of the Income Tax Act, 1961 to the District Mineral Foundation, is available for the following five years-

Assessment Year 2018-2019,
Assessment Year 2019-2020,
Assessment Year 2020-2021,
Assessment Year 2021-2022, and
Assessment Year 2022-2023.

The notification clearly states that for earlier years i.e., 2018-2019 and 2019-2020, it shall be deemed that the above exemption is available.

Conditions for availing the exemption

Each District Mineral Foundation is required to satisfy all the following conditions, in order to avail the exemption under section 10(46) of the Income Tax Act-

The District Mineral Foundation should not be engaged in any commercial activity,
The activities and the nature of specified income should remain unchanged during the entire Financial Year,
The District Mineral Foundation should file the income tax return as per provisions of section 139(4C) (g), and
The District Mineral Foundation should also file the audit report with the income tax return. The practising chartered accountant should duly verify and sign the said audit report.

Synopsis of the exemption

An exemption is available to-	The District Mineral Foundation Trust.
Section under which exemption is available-	Section 10(46) of the Income Tax Act, 1961
Mandatory conditions to be fulfilled-	· Trust shouldn’t be engaged in commercial activity. · There shouldn’t be any change in the activity and nature of income. · Duly file income tax return. · Duly file audit report.
Number of Years exemption is available-	5 years (i.e. from Assessment Year 2018-2019 to Assessment Year 2022-2023)

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Frequently Asked Questions

Common questions about Income Tax Exemption for District Mineral Foundation Trust.

The District Mineral Foundation is a non-profit trust set up in districts affected by mining operations. It works for the interest and benefit of people and areas impacted by mining activities. The Foundation receives funds from contributions made by miners.

Several types of income are exempted, including contributions from lease holders, interest received from late payments by lease holders, penalty amounts charged to lease holders, interest income from the Foundation's funds, interest from savings bank accounts, and interest from term deposits.

The exemption under Section 10(46) of the Income Tax Act is available for five assessment years: 2018-2019, 2019-2020, 2020-2021, 2021-2022, and 2022-2023.

The District Mineral Foundation must not engage in any commercial activity, the nature of its activities and income must remain unchanged during the financial year, it must file an income tax return as per Section 139(4C)(g), and it must file an audited report verified by a practicing chartered accountant.

The exemption was likely introduced to support the District Mineral Foundations and their work in areas affected by mining operations, by reducing their tax burden on specified types of income.

Yes, the notification states that for the assessment years 2018-2019 and 2019-2020, it shall be deemed that the exemption is available, even though the notification was issued in 2020.

The exemption is issued by the Central Board of Direct Taxes (CBDT), which is a statutory authority under the Ministry of Finance responsible for administering direct tax laws in India.

The exemption is provided under Section 10(46) of the Income Tax Act, 1961, which allows the Central Government to exempt certain specified income from taxation.

Yes, the Central Government has the power to revoke or modify the exemption in the future through a notification, as per the provisions of the Income Tax Act.

No, the exemption is specifically available only to District Mineral Foundations set up as per the Mines and Minerals (Development & Regulation) Amendment Act, 2015, and fulfilling the prescribed conditions.