Income Tax Exemption for District Legal Service Authority under Section 10(46)
This move reaffirms the government’s support for statutory bodies providing public services and ensures tax clarity for legal aid institutions.
Let’s break it down for easier understanding.
What is Section 10(46) of the Income-tax Act?
Section 10(46) provides income tax exemption to certain notified bodies that are:
- Established by Central or State law, or
- Constituted by a Government for regulating or administering activities for public benefit.
The CBDT can notify such bodies via official gazette, listing out the exempt income and conditions.
CBDT Notification for District Legal Service Authority
As per CBDT Notification No. 71/2024 dated 28.06.2024 (published under F. No. 300196/30/2023-ITA-I), the District Legal Service Authority (DLSA) has been notified as exempt under Section 10(46) for AYs 2024–25 onwards.
✅ Exempt Incomes:
The following types of income received by DLSA are fully exempt:
- Grants from the Central Government or State Government
- Receipts from legal services rendered
- Bank interest from savings and fixed deposits
- Fee or charges collected in performance of statutory functions
Conditions for Exemption under Section 10(46)
The exemption is subject to strict conditions, as notified by CBDT:
- Exempt income must not be used for any private gain
- Returns of income must be filed regularly under Section 139(4C)
- Accounts should be audited, if applicable
- No commercial activity should be undertaken
- If the body violates any condition, exemption stands withdrawn with retrospective effect
For the full list of conditions, refer CBDT Notification No. 71/2024
Legal Basis and Administrative Structure
- They ensure free legal aid, Lok Adalats, victim compensation, etc.
- Funded and monitored by State Legal Services Authorities under NALSA (National Authority)
Their work is non-commercial and aimed at providing access to justice for weaker sections — making them eligible under Section 10(46).
Expert View: Why This Matters for Tax Practitioners
Many NGOs and statutory bodies struggle with compliance due to confusion over taxability. This notification serves as a model — it shows that:
“If your entity is statutory, not-for-profit, and serves a public function, you can apply for exemption under Section 10(46) through proper channels.”
This opens the door for Panchayat Boards, Pollution Control Boards, and other authorities to apply under the same section, subject to documentation and government approval.
Summary
CBDT has granted income tax exemption under Section 10(46) to District Legal Service Authorities for specified incomes like government grants and legal aid receipts. The exemption is subject to strict conditions and applies from AY 2024–25.
FAQs
Q1. Can private legal NGOs apply for exemption under Section 10(46)?
No. Only statutory authorities constituted under Central or State laws are eligible.
Q2. What happens if the DLSA earns commercial income?
The exemption under Section 10(46) may be revoked if the authority engages in non-authorised commercial activity.
Q3. Is the exemption automatic or requires renewal?
It is valid till withdrawn but subject to compliance.
Final Thoughts
This move by CBDT shows its commitment to easing compliance for statutory service bodies. If you’re running a government-affiliated authority or board, it’s worth evaluating if you qualify under Section 10(46).
Want help drafting your exemption application or managing tax filings for a notified body?
👉 Talk to Efiletax experts today and stay compliant with ease.