In a major relief for the Karnataka State Pollution Control Board (KSPCB), the Central Government has notified income-tax exemption on specific sources of income under Section 10(46) of the Income-tax Act, 1961.
As per Notification No. 71/2025 issued by the Ministry of Finance (Department of Revenue) and published in the Gazette of India, the following categories of income received by the KSPCB will be exempt from income tax:
- Consent Fees Collection from industries established in Karnataka under the Water (Prevention and Control of Pollution) Act, 1974, and the Air (Prevention and Control of Pollution) Act, 1981.
- Charges for Water and Air Analysis collected as per government notifications under the same environmental laws.
- Environmental Compensation Fees levied on polluting entities.
- Any other fee or income related to environmental protection, as notified by the State Government or Central Pollution Control Board.
- Grants, subsidies, reimbursements, or financial assistance received from the Central or State Government, CPCB, or any other government agencies.
- Interest income from the above sources.
- Miscellaneous income such as scrap sales, tender application fees, liquidated damages, and RTI fees.
Key Conditions for Exemption
The exemption is subject to the fulfillment of the following conditions:
- KSPCB must not engage in any commercial activity.
- The nature of specified income and activities must remain unchanged during the relevant financial years.
- The Board must file its income tax return as per Section 139(4C)(g) of the Income-tax Act.
Retrospective & Prospective Applicability
- The exemption has retrospective effect for Assessment Years 2024-25 and 2025-26 (i.e., Financial Years 2023-24 and 2024-25).
- It will also be applicable prospectively for AYs 2026-27 to 2028-29 (FYs 2025-26 to 2027-28).
The government has clarified through an explanatory memorandum that this retrospective application will not adversely impact any taxpayer.
This move is expected to streamline the financial operations of KSPCB, enabling it to better focus on its environmental regulatory functions without the burden of tax liabilities on its statutory income sources.
Official copy of the notification has been attached
CAclubindia
