EXEMPTION FOR MUTUAL CONTRIBUTION
This query is : Resolved
03 February 2022
SUPPLY ARISED OUT OF MUTUAL CONTRIBUTION OF VOLUNTARY ORGANISATIONS. UNDER WHICH COLUMN THIS AMOUNT CLAIMED AS EXEMPTION IN ITR-5 OR ITR- 7.
07 July 2024
In the context of income tax returns (ITR) for voluntary organizations or NGOs, where income arises out of mutual contributions, typically this income falls under the category of exempt income. Here’s how you would generally handle it in ITR-5 or ITR-7:
1. **Exempt Income Reporting:**
- In ITR-5 (applicable for firms other than LLPs), exempt income is reported in Part A-OI (Other Information), under Schedule BP (Computation of income from business or profession).
- In ITR-7 (applicable for trusts, charitable institutions, etc.), exempt income is also reported in Part A-OI, under Schedule EI (Exempt Income).
2. **Nature of Income:**
- Income arising from mutual contributions, where members contribute voluntarily and no profit motive is involved, is often considered exempt under section 11 of the Income Tax Act, which deals with income from property held for charitable or religious purposes.
- Ensure that the income meets the criteria for exemption as per the provisions of the Income Tax Act and is reported accordingly in the relevant schedule.
3. **ITR Filing:**
- While filing ITR-5 or ITR-7, ensure that you correctly categorize the income under exempt income and provide the necessary details as required by the respective forms.
4. **Consultation:**
- It’s advisable to consult with a tax professional or CA familiar with the specific tax implications for NGOs and voluntary organizations to ensure accurate reporting and compliance with tax laws.
By accurately reporting exempt income related to mutual contributions in the appropriate schedule of ITR-5 or ITR-7, you can ensure compliance with tax regulations while availing the benefit of exemption under the Income Tax Act.
1. **Exempt Income Reporting:**
- In ITR-5 (applicable for firms other than LLPs), exempt income is reported in Part A-OI (Other Information), under Schedule BP (Computation of income from business or profession).
- In ITR-7 (applicable for trusts, charitable institutions, etc.), exempt income is also reported in Part A-OI, under Schedule EI (Exempt Income).
2. **Nature of Income:**
- Income arising from mutual contributions, where members contribute voluntarily and no profit motive is involved, is often considered exempt under section 11 of the Income Tax Act, which deals with income from property held for charitable or religious purposes.
- Ensure that the income meets the criteria for exemption as per the provisions of the Income Tax Act and is reported accordingly in the relevant schedule.
3. **ITR Filing:**
- While filing ITR-5 or ITR-7, ensure that you correctly categorize the income under exempt income and provide the necessary details as required by the respective forms.
4. **Consultation:**
- It’s advisable to consult with a tax professional or CA familiar with the specific tax implications for NGOs and voluntary organizations to ensure accurate reporting and compliance with tax laws.
By accurately reporting exempt income related to mutual contributions in the appropriate schedule of ITR-5 or ITR-7, you can ensure compliance with tax regulations while availing the benefit of exemption under the Income Tax Act.
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