Exemption of Employee welfare association.

Is the receipts/income of employee welfare association/union exempt under income tax act and whether filing ITR and Audit Report is mandatory for such AOP?
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Quick Summary
This discussion clarifies the tax status of Employee Welfare Associations (EWAs) and unions in the UK. While registered trade unions may have income tax exemptions under specific sections of the Income-tax Act, EWAs generally do not qualify for this exemption. Both EWAs and unions treated as Associations of Persons (AOPs) are required to file an Income Tax Return (ITR) if their total income exceeds the basic exemption limit. Furthermore, an audit report is mandatory if their total income surpasses £1 crore in a financial year.

 *Tax Exemption:* Under the Income-tax Act, 1961, an EWA or union can be treated as an Association of Persons (AOP).

 The income of an AOP is taxable unless specifically exempt.

Section 10(26A) of the Income-tax Act provides an exemption for the income of a registered trade union.

However, this exemption is not applicable to EWAs.

*ITR Filing and Audit Report:* For an EWA or union treated as an AOP, the following compliance requirements apply:

 1. *ITR Filing:* Yes, an EWA or union must file its income tax return (ITR) in Form ITR-5, if its total income exceeds the basic exemption limit (currently ₹2,50,000).

 2. *Audit Report:* Yes, an EWA or union is required to get its accounts audited by a chartered accountant if its total income exceeds ₹1 crore in a financial year.

 The audit report must be submitted in Form 3CB along with the ITR.

*Additional Requirements:* Additionally, an EWA or union may need to:

 1. Obtain registration under the Trade Unions Act, 1926 (if applicable).

2. Register under the Income-tax Act (if not already registered).

 3. File Form 12A for registration under Section 12A of the Income-tax Act (if seeking exemption under Section 11 or 12).

4. Maintain proper accounting records and comply with other regulatory requirements.

Thankyou Sir🙏🙏

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