Introduction
In India, the government has taken several steps to promote rural development and uplift the lives of people living in rural areas. One such step is the provision of Section 35CCA of the Income Tax Act, 1961, which allows taxpayers to claim deductions on their income tax for expenditure made by way of payment to associations and institutions for carrying out rural development programmes. This provision incentivizes taxpayers to contribute towards the development of rural areas while reducing their tax liability.
Expenditure by way of payment to associations and institutions for carrying out rural development programmes under section 35CCA of Income Tax Act 1961 has several benefits. In this blog, we will discuss the provisions of Section 35CCA and the benefits it offers to both taxpayers and rural communities. We will also answer some frequently asked questions about this provision.
Understanding Section 35CCA
Section 35CCA of the Income Tax Act, 1961, was introduced in 2008 to encourage taxpayers to contribute towards the development of rural areas. According to this section, taxpayers can claim a deduction of 100% of the amount paid by way of expenditure to an association or institution for carrying out rural development programmes. The deduction is allowed in the year in which the payment is made.
To claim this deduction, the following conditions must be met:
- The payment must be made to an association or institution that is engaged in carrying out rural development programmes.
- The association or institution must be approved by the National Committee for Promotion of Social and Economic Welfare or the National Committee for Minorities Education, as the case may be.
- The taxpayer must obtain a certificate from the association or institution, confirming that the amount has been spent for carrying out rural development programmes.
It is important to note that this deduction is allowed only to taxpayers who are engaged in business or profession. Individuals who are not engaged in any business or profession are not eligible to claim this deduction.
Benefits of Section 35CCA
The provision of Section 35CCA offers several benefits to both taxpayers and rural communities. Let’s take a look at some of them:
Benefits to Taxpayers
- Tax savings: Taxpayers can claim a deduction of 100% of the amount paid by way of expenditure to an association or institution for carrying out rural development programmes. This can result in significant tax savings for taxpayers.
- CSR compliance: Section 35CCA can also help companies meet their Corporate Social Responsibility (CSR) obligations. By contributing towards rural development programmes, companies can fulfil their CSR obligations and improve their public image.
Benefits to Rural Communities
- Infrastructure development: The funds received by associations and institutions can be used for the development of infrastructure such as roads, bridges, and schools in rural areas. This can improve the quality of life for people living in rural areas.
- Skill development: Rural development programmes can also focus on skill development, which can help create employment opportunities for the rural population. This, in turn, can help reduce poverty and improve the overall economic condition of rural areas.
- Agricultural development: Rural development programmes can also focus on agricultural development, which can help improve agricultural productivity and increase the income of farmers.
Frequently Asked Questions
Q. Who is eligible to claim a deduction under Section 35CCA of the Income Tax Act, 1961? A. Taxpayers who are engaged in business or profession are eligible
Q. Is there a limit on the amount that can be claimed as a deduction under Section 35CCA? A. No, there is no limit on the amount that can be claimed as a deduction under Section 35CCA.
Q. Can the deduction be claimed for payments made to any association or institution engaged in rural development programmes? A. No, the association or institution must be approved by the National Committee for Promotion of Social and Economic Welfare or the National Committee for Minorities Education, as the case may be.
Q. Is it mandatory to obtain a certificate from the association or institution confirming the expenditure made on rural development programmes? A. Yes, it is mandatory to obtain a certificate from the association or institution confirming the expenditure made on rural development programmes.
Q. Can individuals who are not engaged in any business or profession claim a deduction under Section 35CCA? A. No, individuals who are not engaged in any business or profession are not eligible to claim a deduction under Section 35CCA.
Conclusion
The provision of Section 35CCA of the Income Tax Act, 1961, provides an excellent opportunity for taxpayers to contribute towards the development of rural areas while reducing their tax liability. It also offers several benefits to rural communities, such as infrastructure development, skill development, and agricultural development. By incentivizing taxpayers to contribute towards rural development programmes, the government is taking steps towards creating a more equitable and prosperous society.
If you are engaged in business or profession and are looking for ways to reduce your tax liability while contributing towards social development, Section 35CCA can be an excellent option. However, it is important to ensure that the payments are made to approved associations or institutions and that the necessary certificates are obtained. By doing so, you can not only benefit from tax savings but also contribute towards the development of rural areas and uplift the lives of people living there.
Section 35CCA, of Income Tax Act, 1961
Section 35CCA, of Income Tax Act, 1961 states that
(1) Where an assessee incurs any expenditure by way of payment of any sum—
(a) to an association or institution, which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved by the prescribed authority; or
(b) to an association or institution, which has as its object the training of persons for implementing programmes of rural development; or
(c) to a rural development fund set up and notified62-63 by the Central Government in this behalf; or
(d) to the National Urban Poverty Eradication Fund set up and notified by the Central Government in this behalf,
the assessee shall, subject to the provisions of sub-section (2), be allowed a deduction of the amount of such expenditure incurred during the previous year.
(2) The deduction under clause (a) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution referred to in the said clause unless the assessee furnishes a certificate from such association or institution to the effect that—
(a) the programme of rural development had been approved by the prescribed authority before the 1st day of March, 1983; and
(b) where such payment is made after the 28th day of February, 1983, such programme involves work by way of construction of any building or other structure (whether for use as a dispensary, school, training or welfare centre, workshop or for any other purpose) or the laying of any road or the construction or boring of a well or tube-well or the installation of any plant or machinery, and such work has commenced before the 1st day of March, 1983.
(2A) The deduction under clause (b) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution unless the assessee furnishes a certificate from such association or institution to the effect that—
(a) the prescribed authority had approved the association or institution before the 1st day of March, 1983; and
(b) the training of persons for implementing any programme of rural development had been started by the association or institution before the 1st day of March, 1983.
Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to an association or institution for carrying out the programme of rural development referred to in sub-section (1), shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee, the approval granted to such programme of rural development, or as the case may be, to the association or institution has been withdrawn.
(2B) No certificate of the nature referred to in sub-section (2) or sub-section (2A) shall be issued by any association or institution unless such association or institution has obtained from the prescribed authority authorisation in writing to issue certificates of such nature.
Explanation.—For the purposes of this section, “programme of rural development” shall have the meaning assigned to it in the Explanation to sub-section (1) of section 35CC.
(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under section 35C or section 35CC or section 80G or any other provision of this Act for the same or any other assessment year.