The Hindu Business Line : Educational, medical institutions run on commercial lines may lose tax sop

THE Finance Minister, Mr P. Chidambaram, on Tuesday hinted that educational and medical institutions run on commercial lines and with huge surpluses may have to give up the income-tax exemptions enjoyed by them.

Incomes of such institutions are currently tax exempt by virtue of them being registered as charitable trusts/societies under the Income-Tax law.

Replying to supplementaries during question hour in the Rajya Sabha, the Finance Minister said that a Bill to amend tax laws would be introduced in the Lok Sabha by Friday and referred to the Standing Committee.

"I need the support of the House. It is a sensitive subject and I want to approach the subject with caution and sensitivity," Mr Chidambaram said.

While highlighting that education and medical institutions run on commercial lines could be an avenue for enhancing Government revenues, the Institute of Chartered Accountants of India (ICAI) had in its pre-budget memorandum for 2005-06 held that the educational institutions were perforce being required to operate as charitable trusts/society by the regulations of the education boards or universities.

The institute had held that education institutions would go in for corporatisation and contribute substantial amount to the revenue every year if the education boards or universities amend their regulations withdrawing the conditions of recognising only those institutions that are societies or trusts.

ICAI had observed that most of the educational institutions were being run on commercial basis and no tax was being offered on such incomes. Further, medical institutions and hospitals also operate as a society or a trust to get benefit of allotment of land at a concessional rate.

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