Question

What is the tax treatment of 'mutual fund returns received by a non-profit organization (NGO)'?

Accepted Answer

Charitable institutions registered under Sections 11/12 and/or 80G are exempt from income tax on income applied for charitable purposes — capital gains from mutual funds are exempt if applied for charitable objects within the prescribed time — Charitable trusts/institutions registered under Sections 11/12 of the Income Tax Act are exempt from tax on income (including capital gains from mutual funds) to the extent it is accumulated or applied for charitable/religious purposes. The institution must file ITR-7 and meet the 85% application-of-income requirement. Registration under Section 12A is the gateway to this exemption — without registration, gains are taxed at applicable rates.