Tax Exemption Notification for the National Skill Development Corporation
On January 21, 2022, the Central Board of Direct Taxes (CBDT) issued Notification No. 10/2022, granting tax exemptions to the National Skill Development Corporation (NSDC) for the Assessment Years (AY) 2022-23 to 2026-27. Established by the Central Government, NSDC aims to foster skill development across the nation. Under Section 10(46) of the Income Tax Act, 1961, specified income received by NSDC qualifies for tax exemption.
Details of the Notification
The notification specifies various categories of income that are exempt from taxation for NSDC:
- Government Grants: All amounts received as government grants.
- Skill Development Grants: Grants specifically allocated for skill development initiatives.
- Capital Gains: Both long-term and short-term capital gains arising from investments in skill development projects.
- Dividends and Royalties: Income derived from dividends and royalties associated with NSDC-backed skill development ventures.
- Fees from Activities:
- Accreditation fees
- Registration fees
- Fees from training partners
- Other cost recovery for skill development activities
- Administrative Fees: Income from administrative and mobilization fees related to scheme management.
- International Income: Funds sourced from international institutions aimed at enhancing skilling, training, and employability.
- Interest on Loans: Interest accrued on loans provided to institutions involved in skill development.
- Miscellaneous Income: Income from various sources, which may include:
- Sale of scrap
- Profits from asset sales
- Application fees under the Right to Information (RTI) Act
- Bank guarantee forfeitures
- Interest from income tax refunds
- Reversal of excess provisions
- Interest on Specified Income: Interest earned on the types of income listed above.
Conditions for Exemption
To qualify for the tax exemption outlined in the notification, NSDC must adhere to the following conditions:
- No Commercial Activities: NSDC must refrain from participating in any commercial ventures.
- Consistency in Activities: NSDC's activities and the specified income must remain consistent throughout the applicable financial years.
- Filing Requirements: NSDC is obligated to file income tax returns in accordance with Clause (g) of Sub-section (4C) of Section 139 of the Income Tax Act, 1961.
Amendments (October 2024)
Notification No. 08/2024, issued on October 8, 2024, revoked the tax exemption, limiting it to GST exemptions solely for skilling services provided by Training Bodies accredited by an Awarding Body recognized by the National Council for Vocational Education and Training (NCVET). Consequently, NSDC-approved Training Partners are no longer eligible for exemption.
Industry Impact and Restoration
The Ministry of Skill Development and Entrepreneurship noted that the withdrawal of this exemption negatively impacted the skilling ecosystem. During the 55th GST Council meeting, recommendations were made to restore the exemption for NSDC-approved Training Partners, emphasizing the importance of maintaining support for skill development initiatives.