Educational institutions in India enjoy certain tax exemptions under the Income Tax Act, 1961, especially when they operate for charitable or not-for-profit purposes. However, not all institutions are fully exempt — taxation depends on registration status, source of income, and compliance with prescribed conditions. Over the past seven years, Finance Acts and CBDT circulars have clarified how schools, colleges, and universities are taxed.
In this article, we provide a year-wise overview of the income tax on educational institutions from FY 2018–19 to FY 2025–26, along with insights on surcharge, cess, and GST applicability.
|
Financial Year |
Assessment Year |
Exemption Status |
Applicable Tax Rate (if taxable) |
Surcharge |
Health & Education Cess |
Effective Tax Burden |
|
2018–19 |
AY 2019–20 |
Exempt under Sec. 10(23C)/12AA |
30% (if corporate form) / slab (if trust) |
7%, 12% |
4% (introduced) |
26% – 34.94% |
|
2019–20 |
AY 2020–21 |
Same provisions |
Same as above |
7%, 12% |
4% |
26% – 34.94% |
|
2020–21 |
AY 2021–22 |
12AA registration replaced by 12AB |
Same as above |
7%, 12% |
4% |
26% – 34.94% |
|
2021–22 |
AY 2022–23 |
Continued 12AB regime |
Same as above |
7%, 12% |
4% |
26% – 34.94% |
|
2022–23 |
AY 2023–24 |
Re-registration under 12AB mandatory |
Same as above |
7%, 12% |
4% |
26% – 34.94% |
|
2023–24 |
AY 2024–25 |
Same as above |
Same as above |
7%, 12% |
4% |
26% – 34.94% |
|
2024–25 |
AY 2025–26 |
Same as above |
Same as above |
7%, 12% |
4% |
26% – 34.94% |
Source: Finance Acts (2018–2025), Income Tax Department- incometax.gov.in
Institutions existing solely for education (and not for profit) can claim exemption under Section 10(23C) or Section 12AB.
If the institution earns surplus, it must be applied to educational purposes to retain exemption.
From AY 2021–22, registration of charitable institutions shifted from Section 12AA to Section 12AB.
Institutions had to re-register to continue availing exemption.
If exemption is not available, taxation applies:
Trust/NGO model: taxed at slab rates.
Company model: taxed at 30% corporate rate plus surcharge & cess.
Exempt: Core education (schools, recognized colleges, approved universities).
Taxable: Private coaching centers, training institutes, canteens, transportation, and commercial courses attract GST @ 18%.
This distinction between exempt and taxable services is critical for compliance.
For exempt institutions, tax liability is zero if compliance is maintained.
For taxable institutions (non-exempt), effective tax rates range between 26% and 34.94%, similar to domestic companies.
Over the past seven years, the income tax on educational institutions has remained stable, with the most significant change being the shift to 12AB registration from AY 2021–22. While most genuine educational institutions enjoy exemption, those operating commercially or failing compliance face regular tax liability. At the same time, GST for educational institutions continues to exempt core services but taxes ancillary services at 18%. Careful compliance is necessary to retain exemptions and avoid penalties.
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No. Only those registered under Section 10(23C) or 12AB and applying income for education qualify for exemption.
It is the re-registration regime introduced from AY 2021–22 for charitable and educational institutions.
No. Coaching centers and commercial training institutes are taxable like regular businesses.
As long as profits are applied to educational purposes and not distributed, exemption continues.
It is 30% plus surcharge and cess (if registered as a company) or slab rates (if registered as a trust).
No, core educational services by recognized institutions are GST-exempt.
Transport, canteen, placement, coaching, and commercial training attract GST at 18%.
Yes, the main change was the shift from Section 12AA to 12AB registration from AY 2021–22.
4% Health & Education Cess applies if the institution is taxable.
We assist with 12AB registration, income tax return filing, GST compliance, and advisory for education sector taxation.
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