Ledger Logic
Accounting & Compliance
Accounting & Compliance · Kolte Enterprises← Back to Ledger Logic
A working checklist for trusts, societies and Section 8 companies running schools and colleges — the exemption tests, audit forms, TDS, GST carve-outs and donation reporting that keep an institution’s tax-free status alive.
One number decides your entire income-tax life: Rs 5 crore of aggregate annual receipts. Below it, a school existing solely for education is automatically exempt under Sec 10(23C)(iiiad). Cross it — counting every institution your trust runs, added together — and the exemption survives only on registration, the 85% application test and an audit form filed on time. Trusts discover the aggregation rule after they have crossed the line.
Source: Section 10(23C)(iiiad) of the Income Tax Act 1961 read with Rule 2BC (Rs 5 crore limit, Finance Act 2021, aggregate basis affirmed in CBDT Circular 6/2023); corresponding provisions of the registered non-profit regime in ITA 2025.An educational institution runs the strangest compliance stack in this series: its core income is exempt, yet it files more forms than most taxable businesses. A school wears five hats at once — an exemption claimant that must re-prove itself every five years, one of the larger TDS deductors in its town (every teacher's salary), a GST-exempt supplier with taxable side-streams it rarely notices, a donation-reporting entity under 80G and often FCRA, and a fee collector answerable to the state's fee-regulation machinery.
The KPIs below follow that order — the exemption first, because everything else is housekeeping compared to losing it.
For trusts and societies the Income Tax Act works in reverse: income is taxable unless the institution keeps qualifying. Each row below is a qualification, not a formality.
| KPI / Compliance Item | Threshold & Action | Due Date | Source |
|---|---|---|---|
| The Rs 5 crore line — 10(23C)(iiiad) | Automatic exemption for institutions existing solely for education with aggregate annual receipts up to Rs 5 crore — aggregated across all institutions of the same trust. Track the running total quarterly, not in March. | Monitor quarterly | Sec 10(23C)(iiiad) · Rule 2BC |
| 12AB registration above the line | Past Rs 5 crore, exemption needs registration under the registered non-profit regime — provisional first, then regular, renewed every 5 years via Form 10AB filed at least six months before expiry. Diarise the renewal the day the certificate arrives. | 5-year cycle | Sec 12AB / ITA 2025 NPO chapter |
| 85% application test | At least 85% of income must be applied to educational objects in the year. A shortfall is not fatal if the accumulation option (Form 10) or deemed-application option (Form 9A) is exercised before the statutory date — after that, the shortfall is taxable. | Forms 9A / 10 by 31 Aug 2027 | Sec 11(1)–(2) |
| Audit — Form 10B / 10BB | Mandatory once income before exemption crosses the basic limit. Which form applies depends on size and profile (10B above Rs 5 crore total income, foreign contribution or overseas application; 10BB otherwise). The wrong form is treated as no form. | 30 Sep 2027 | Sec 12A(1)(b) · Rule 16CC/17B |
| ITR-7 filing | The trust return, after the audit form. Non-audit institutions file by the earlier date. | 31 Oct 2027 / 31 Aug 2027 | Sec 139(4A)/(4C) |
| Corpus donations | Exempt only when the written direction exists and the corpus is invested in Sec 11(5) modes. A "building fund" collected without both legs is ordinary income. | Continuous | Sec 11(1)(d) |
| Anonymous donations | Taxed at 30% beyond the higher of Rs 1 lakh or 5% of total donations. The defence is a donor register with name and address — see the bookkeeping section. | Continuous | Sec 115BBC |
| Permitted investments only | Trust funds sit only in Sec 11(5) modes (scheduled banks, post office, specified securities). One private loan or unlisted share can cost the exemption. | Continuous | Sec 11(5) · 13(1)(d) |
Exempt income does not exempt the institution from deducting tax on what it pays. A mid-sized school is usually among the larger TDS files in its ward.
| KPI / Compliance Item | Threshold & Action | Due Date | Source |
|---|---|---|---|
| 192 — teacher & staff salaries | Monthly TDS on estimated annual salary, regime option captured from each employee at year start. This is the school's biggest and most scrutinised deduction. | 7th of next month | Sec 192 |
| 194C — transport, canteen, security contracts | 1% (individual/HUF payee) or 2% (others) above Rs 30,000 per bill / Rs 1 lakh aggregate — the bus operator and housekeeping agency rows most schools miss. | 7th of next month | Sec 194C |
| 194J — visiting faculty & professionals | 10% on professional fees above Rs 30,000 a year — guest lecturers, counsellors, architects, auditors. | 7th of next month | Sec 194J |
| 194I — rented premises & buses | 10% on building rent (2% plant, incl. hired buses with drivers under some contracts) once rent crosses Rs 2.4 lakh a year. | 7th of next month | Sec 194I |
| Quarterly returns 24Q / 26Q | Salary and non-salary statements; Rs 200/day late fee under 234E runs per return. | 31 Jul, 31 Oct, 31 Jan, 31 May | Rule 31A |
| Form 16 / 16A issuance | Form 16 to every teacher by 15 June; 16A to contractors quarterly, downloaded from TRACES. | 15 Jun / quarterly | Rule 31 |
| Nil/lower deduction on the school's own receipts | Banks deduct on FD interest unless the institution obtains a 197 certificate or files the prescribed declaration — recover the leak, do not just claim refunds. | April, annually | Sec 197 |
Services by an educational institution (pre-school up to higher secondary, or leading to a legally recognised qualification) to its students, faculty and staff are exempt. Almost everything a school does beyond that sentence is potentially taxable.
| KPI / Compliance Item | Threshold & Action | Due Date | Source |
|---|---|---|---|
| Core exemption — Sl. 66 | Tuition, admission, examination, transport and catering supplied by the school to its own students, faculty and staff — exempt. Keep fee heads mapped to this entry. | Continuous | Notification 12/2017 Sl. 66 |
| Inward services — up to higher secondary | Transport, catering (incl. mid-day meals), security, cleaning and housekeeping supplied to a school up to higher secondary are exempt in the vendor's hands — check vendors are not charging you GST they need not. | Vendor review, annual | Notification 12/2017 Sl. 66(b) |
| Taxable side-streams | Hall and ground rentals, uniform and stationery sales, franchise/brand fees, festival stalls, parking — taxable supplies. Registration triggers at Rs 20 lakh of taxable-plus-exempt aggregate turnover once any taxable stream exists. | Monitor | Sec 22 CGST |
| Hostel & mess run by the school | Accommodation and food for the school's own students ride the student-services exemption; hostels run as a separate commercial activity need the specific hostel exemption tests instead. | Classify once | Sl. 66 · 53rd Council clarifications |
| Coaching is not education | Private coaching, hobby classes and non-recognised certificate courses are 18% services — a school running evening coaching batches is running a taxable vertical. | Continuous | Definition, Notification 12/2017 |
| Board affiliation fees | Affiliation and related services by boards to schools are taxable at 18% — budget it as a cost; the board collects it. | At affiliation/renewal | CBIC Circular 234/28/2024 |
| RCM exposure | If the school is GST-registered: security services from a non-body-corporate, legal services and GTA freight land on the school under reverse charge — payable in cash. | Monthly, if registered | Notification 13/2017 |
| Returns, if registered | GSTR-1 and 3B for the taxable streams (QRMP available); GSTR-9 above Rs 2 crore. | Monthly / quarterly | Sec 37/39/44 CGST |
Profession Tax is a state levy run by the Maharashtra Goods & Services Tax Department. For a school the employee side is the whole story — a 60-teacher payroll is a 60-line PTRC return every month.
| Registration | Who needs it / what you pay | Due date | Source |
|---|---|---|---|
| PTEC (Enrolment) |
For the trust / society / company running the institution. Flat Rs 2,500 per year. | 30 June | MahaGST PT Act 1975 |
| PTRC (Registration) |
As employer of teachers and staff above Rs 7,500 p.m. (male) or Rs 25,000 p.m. (female). Slab deduction from salary — Rs 200 p.m. plus Rs 300 in February on the top slab; annual ceiling Rs 2,500 per employee. | Last day of the next month | MahaGST PT Rules |
Previous-year PT liability above Rs 1 lakh means monthly PTRC returns — true for most schools of any size. Returns go on mahagst.gov.in; late filing costs Rs 1,000 per return plus interest.
Since 2022 the books of a registered institution are prescribed by law, not convention: Rule 17AA lists them, fixes where they are kept, and requires them for ten years. For a school the donation trail matters as much as the fee trail.
One folder per FY: fee collections, donation records + 10BD/10BE, investment proofs, TDS challans and returns, audit forms (10B/10BB) with computation, ITR-7 acknowledgement, FCRA returns, fee-committee orders. Scan within 30 days — the 12AB renewal five years later will ask for documents nobody remembers filing.
The five mistakes we see most often in school and trust files:
The limit applies to the aggregate receipts of the trust across every institution it runs. Two schools of Rs 3 crore each are over the line, and the year you discover it is usually the year the exemption is already gone — registration has to be in place before you need it.
Form 10B and 10BB are not interchangeable; the wrong or late form is treated as no audit, and assessments have denied the whole exemption on that ground alone. Match the form to the year's profile every year — size, foreign contribution, overseas application — and file by 30 September.
A donation linked to admission is capitation — penal under the state Act, and taxable because it is neither voluntary nor corpus. Genuine corpus needs a written direction from the donor and investment in Sec 11(5) modes. Timing is evidence: collections clustering around admissions invite exactly the inference you fear.
The exemption covers services to your students. Hall rentals to outsiders, uniform and book sales, franchise fees and summer-camp income are taxable — and once any taxable stream exists, the Rs 20 lakh registration test counts your exempt fees too. Map every revenue head once a year.
Application of income cannot be back-dated. If a building project slipped and the year's spending is short of 85%, the accumulation (Form 10) and deemed-application (Form 9A) options must be exercised by their statutory date — miss it and the shortfall is simply taxable, audit or no audit.
| Month | Compliance milestones |
|---|---|
| April | TDS payment for March (30 Apr); 197 / nil-deduction applications for the new year; salary-regime declarations from staff. |
| May | Q4 TDS returns 24Q/26Q (31 May); Form 10BD statement of donations (31 May) and 10BE certificates to donors; SFT where applicable. |
| June | Form 16 to every teacher (15 Jun); PTEC payment (30 Jun). |
| July | Q1 TDS returns (31 Jul); fee-register vs bank reconciliation for Q1. |
| August | Forms 9A / 10 for the 85% test (31 Aug); ITR-7 for non-audit institutions (31 Aug). |
| September | Audit — Form 10B / 10BB (30 Sep); verify which form applies this year. |
| October | ITR-7 for audited institutions (31 Oct); Q2 TDS returns (31 Oct). |
| November | 12AB / 80G renewal check — file Form 10AB if the five-year window opens. |
| December | FCRA annual return FC-4 (31 Dec) if registered; GSTR-9 for taxable streams (31 Dec). |
| January | Q3 TDS returns (31 Jan); RTE reimbursement follow-up. |
| February | Fee-committee proposals for the next year; PT top-slab month (Rs 300). |
| March | 85% application review before year-end; Sec 11(5) investment audit; books closure; year-end TDS. |
Most schools run as trusts or societies — but where the vehicle is a Section 8 company, the entire Companies Act column below applies on top of the trust-tax regime above, with per-day late fees that never stop running.
Talk to our compliance team. We work with schools, colleges and educational trusts across Maharashtra — from 12AB registration and Form 10B audits to the GST mapping of every fee head.
Book a Free ConsultationLedger Logic advises businesses across Bhusawal, Mumbai and Pune on Income Tax, TDS, GST, Profession Tax and statutory bookkeeping. The points above are general guidance — please consult your CA before acting on a specific transaction.