I-T department to train lens on charitable trusts

MUMBAI: The income tax (IT) department has trained its lens on all charitable trusts (which would include several schools and hospitals) that have been denied registration for tax exemption, but are continuing to avail I-T benefits.

All such cases will be picked up for manual scrutiny during the current financial year 2016-17, an internal instruction note rolled out by the Central Board of Direct Taxes ( CBDT) has said.

Entities such as scientific research associations, universities and colleges that are availing certain tax benefits under section 35 of the I-T Act will also be selected for manual scrutiny. Section 35 grants a weighted deduction on scientific research expenditure carried out by such entities (A deduction in excess of the expenditure incurred).

Manual scrutiny is a regular feature carried out in selective cases to ascertain whether the taxpayer has declared his or its income correctly in I-T returns and has paid the taxes due. I-T returns for the year ended March 31, 2016 are filed by taxpayers in current financial year, which commences from April 1.

For other tax payers such as individuals and companies, cases where I-T officials have in the course of an earlier assessment made additions in excess of Rs 10 lakh to the income declared by a taxpayer (Rs 10 crore for transfer pricing cases) will continue to be selected for manual scrutiny. This limit of Rs 10 lakh stands hiked to Rs 25 lakh for the four metros, and the cities of Ahmedabad, Bengaluru, Hyderabad and Pune. "The reason is that many high-value taxpayers increasingly hail from such cities," explains an I-T official.

Other cases that will fall within the ambit of manual scrutiny are those where an I-T survey , search or seizure was carried out.