Income Tax Exemption to District Mineral Foundation

The Central Board of Direct Taxes (CBDT), through notification no. 73/2020- Income Tax dated 10th September 2020, has exempted certain specified income derived by the District Mineral Foundation Trust. This exemption is thoroughly explained in the current article.

Understanding the District Mineral Foundation

Before exploring the available exemption, it is crucial to understand the term ‘District Mineral Foundation’. The Mines and Minerals (Development & Regulation) Amendment Act, 2015 mandates the establishment of the District Mineral Foundations in all districts in India affected by mining operations.

Fundamentally, a District Mineral Foundation is a trust established as a non-profit entity in mining-affected districts. Its primary role is to work for the benefit of people and areas impacted by mining-related activities. The Foundation is funded by contributions from miners.

Available Exemption

Based on the powers available under section 10(46) of the Income Tax Act, 1961, the Central Government exempts specified income of the District Mineral Foundation Trust. The types of exempted income and the number of years it is available are detailed below.

The following types of income are exempted under the Income Tax Act:

Contribution by the leaseholder to the District Mineral Foundation.
Interest received from the leaseholders towards late payment.
Any amount of penalty charged to leaseholders.
Interest income from funds available under the District Mineral Foundation.
Interest income received from the Savings Bank Account.
Interest income received on excess fund invested in a term deposit.

The exemption under section 10(46) of the Income Tax Act, 1961, is available to the District Mineral Foundation for five years:

Assessment Year 2018-2019,
Assessment Year 2019-2020,
Assessment Year 2020-2021,
Assessment Year 2021-2022, and
Assessment Year 2022-2023.

The notification confirms that for earlier years, i.e., 2018-2019 and 2019-2020, the above exemption is deemed available.

Conditions for Availing the Exemption

Each District Mineral Foundation must satisfy the following conditions to avail the exemption under section 10(46) of the Income Tax Act:

The District Mineral Foundation should not be engaged in any commercial activity.
The activities and nature of specified income should remain unchanged throughout the Financial Year.
The District Mineral Foundation should file the income tax return following provisions of section 139(4C) (g).
The District Mineral Foundation should also file the audit report with the income tax return. The practising chartered accountant should duly verify and sign the said audit report.

Synopsis of the Exemption

An exemption is available to-	The District Mineral Foundation Trust.
Section under which exemption is available-	Section 10(46) of the Income Tax Act, 1961
Mandatory conditions to be fulfilled-	Trust shouldn’t be engaged in commercial activity. There shouldn’t be any change in the activity and nature of income. Duly file income tax return. Duly file audit report.
Number of Years exemption is available-	5 years (i.e. from Assessment Year 2018-2019 to Assessment Year 2022-2023)

For a more comprehensive understanding of the income tax exemptions applicable, you may also explore topics such as life insurance income tax exemption and income tax exemption for NRIs, which could offer broader insights into tax benefits available.

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Frequently Asked Questions

Common questions about Income Tax Exemption to District Mineral Foundation India.

The District Mineral Foundation is a non-profit trust set up in districts affected by mining operations. It works for the interest and benefit of people and areas impacted by mining activities. The Foundation receives funds from contributions made by miners.

Several types of income are exempted, including contributions from lease holders, interest received from late payments by lease holders, penalty amounts charged to lease holders, interest income from the Foundation's funds, interest from savings bank accounts, and interest from term deposits.

The exemption under Section 10(46) of the Income Tax Act is available for five assessment years: 2018-2019, 2019-2020, 2020-2021, 2021-2022, and 2022-2023.

The District Mineral Foundation must not engage in any commercial activity, the nature of its activities and income must remain unchanged during the financial year, it must file an income tax return as per Section 139(4C)(g), and it must file an audited report verified by a practicing chartered accountant.

The exemption was likely introduced to support the District Mineral Foundations and their work in areas affected by mining operations, by reducing their tax burden on specified types of income.

Yes, the notification states that for the assessment years 2018-2019 and 2019-2020, it shall be deemed that the exemption is available, even though the notification was issued in 2020.

The exemption is issued by the Central Board of Direct Taxes (CBDT), which is a statutory authority under the Ministry of Finance responsible for administering direct tax laws in India.

The exemption is provided under Section 10(46) of the Income Tax Act, 1961, which allows the Central Government to exempt certain specified income from taxation.

Yes, the Central Government has the power to revoke or modify the exemption in the future through a notification, as per the provisions of the Income Tax Act.

No, the exemption is specifically available only to District Mineral Foundations set up as per the Mines and Minerals (Development & Regulation) Amendment Act, 2015, and fulfilling the prescribed conditions.