New Delhi, January 20, 2017

Several private educational trusts being run on a not-for-profit model have come under the Income Tax lens after recent search operations revealed that they were allegedly involved in money laundering.

“There is lack of transparency in the accounting and functioning of these institutes, and there is a need to look into their operations,” a senior government official told HT on the condition of anonymity. Taxmen are closely monitoring the accounts of these institutions, and the flow of money into them. Sources said many of these trusts are repositories of black money.

Educational institutions are registered as charitable trusts, and 85% of their income is exempt from tax. The remaining 15% can also be exempted if certain provisions of the Income Tax Act are adhered to.

The government had been looking into ways to bring educational institutions on a par with other commercial entities as far as the tax net is concerned, considering that they charge high fees – besides capitation funds – from students.

However, most of the institutes have no record of money coming in as capitation funds. The Income Tax department can cancel the registration of such institutions if they are found to be flouting the principles pertaining to charitable trusts.

Sources said the Income Tax department was trying to draw information on these institutions from various agencies. “We have our ways of getting all the right data,” the official said.

Many educational institutions had been under the government scanner over alleged monetary discrepancies even before Prime Minister Narendra Modi announced the demonetisation exercise on November 8.

[The Hindustan Times]