Income Tax Exemption to District Mineral Foundation

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Income Tax Exemption to District Mineral Foundation

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

  1. Contribution by the lease holder to the District Mineral Foundation.
  2. Interest received from the lease holders towards late payment.
  3. Any amount of penalty charged to the lease holders.
  4. Interest income from fund available under District Mineral Foundation.
  5. Interest income received from the Saving Bank Account.
  6. 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-

  1. Assessment Year 2018-2019,
  2. Assessment Year 2019-2020,
  3. Assessment Year 2020-2021,
  4. Assessment Year 2021-2022, and
  5. 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-

  1. The District Mineral Foundation should not be engaged in any commercial activity,
  2. The activities and the nature of specified income should remain unchanged during the entire Financial Year,
  3. The District Mineral Foundation should file the income tax return as per provisions of section 139(4C) (g), and
  4. 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)

 

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.