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Direct Tax

Section 10(23C) — Education & Hospital Exemption

Section 10(23C) income tax exemption for schools, colleges, and hospitals — applicability analysis, prescribed authority application, 85% income application test, and Form 56D / Form 10 compliance.

Reviewed by CA Harun Raaj, ICAI Reg. No. 238303·Last reviewed:
Discuss with usTypical timelineSection 10(23C) — Education & Hospital Exemption

Section 10(23C) income tax exemption for schools, colleges, and hospitals — applicability analysis, prescribed authority application, 85% income application test, and Form 56D / Form 10 compliance.

What is included
  • • Applicability analysis against the Section 10(23C) categories
  • • Prescribed authority application preparation
  • • 85% income application test computation
  • • Form 10 accumulation filing where income exceeds application
  • • Section 11 vs Section 10(23C) route decision
Documents required
  • • Certificate of Incorporation
  • • Entity PAN Card
  • • MOA & AOA
  • • Trust Deed / Society Rules / Memorandum
  • • Registration Certificate (12A / 80G / Section 8)
Government fees

See the fee table below for the statutory filing charge and common delay logic.

Legal basis
  • • Section 10(23C)(iiiab) / (iiiad) / (vi) / (via) of the Income-tax Act 1961
  • • Prescribed authority approval
  • • Form 56D / Form 10 (income tax portal)
Not included in this service
  • ✕The 12AB / 80G trust route — we compare, you choose, we run one
  • ✕The annual Form 10B / 10BB audit — separate
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Process

How the service works

The workflow is built to be predictable: document collection, legal review, filing, and post-filing follow-through.

Step 1Analyse

Run the applicability analysis

We map the institution to the right Section 10(23C) category — (iiiab) / (iiiad) for lower-receipts entities, (vi) / (via) for the prescribed-authority route.

Step 2Apply

File the application

We prepare and file the prescribed authority application with the institution’s accounts and activity details.

Step 3Comply

Set up the 85% test

We set up income application tracking — the 85% application test and Form 10 for any accumulation.

Step 4Decide

Compare with the trust route

We run the Section 11 vs Section 10(23C) comparison so the institution is on the route that fits its receipts and governance.

AEO summary

Educational and medical institutions can claim income tax exemption under Section 10(23C) — through the prescribed authority route, with the 85% income application test and Form 10 for accumulation. We run the applicability analysis, the application, and the annual compliance.

The institution-specific exemption

Section 10(23C) exempts the income of educational and medical institutions — the income is excluded from total income when the institution applies it to its objects. The route runs through the prescribed authority for larger entities and the (iiiab) / (iiiad) categories for others.

The exemption is conditional on application: at least 85% of income applied to the institution’s objects, with accumulation beyond that covered by Form 10. It is an exemption earned annually, not granted once.

  • • (iiiab) / (iiiad) / (vi) / (via) categories
  • • Prescribed authority approval
  • • 85% income application test

Two routes, one institution

Many institutions sit at the junction of Section 10(23C) and the Section 11-13 trust route — and the choice affects approval duration, application tests, and the donor-eligibility question. The comparison is rarely settled by the deed alone; it is settled by the receipts trajectory and the governance structure.

We run both routes against the institution’s actual numbers and recommend the one that keeps the exemption defensible.

  • • Route comparison with real numbers
  • • Form 10 for accumulation beyond the limit
  • • Prescribed authority or CIT (Exemptions) track

Government fees

Fee breakdown

ItemFeeNotes
Form 56D / Form 10 filingNilNo government fee applies to these income tax portal filings.

Timeline

Typical turnaround

Typical timeline usually means a 3–6 months (prescribed authority processing) turnaround, assuming documents are complete and any board or shareholder approvals are already in place.

Pricing note

There is no fixed government fee profile until the engagement scope is confirmed; the professional fee is quoted after the document review.

Related services

Keep the company moving

School & Trust Accounting

Accounts, 85% application tracking, and Form 10 for schools and trusts

Hospital GST & Tax

The healthcare counterpart — GST and income tax for hospitals

Form 10B / 10BB Audit

The annual audit report that supports the exemption

FAQ

Frequently asked questions

Who can claim Section 10(23C)?
Educational institutions, universities, hospitals, and other entities listed in the section — through the categories (iiiab), (iiiad), (vi), and (via), depending on receipts and whether the entity is substantially financed by the government.
What is the 85% rule?
The institution must apply at least 85% of its income to the objects for which it exists. Income accumulated beyond the limit must be covered by a Form 10 filing, mirroring the Section 11 accumulation regime.
Section 10(23C) or Section 12AB — which is better?
It depends on the entity. Section 10(23C) is the institution-specific route (education, healthcare) with prescribed-authority approval; Section 12AB is the general trust route under Sections 11-13. Receipts, approval history, and governance decide the fit — we run the comparison with your numbers.
What should you send us before we start?
The institution’s registration documents and PAN, audited accounts for the last three years, the receipts position, and the governing instrument. That is enough for us to analyse and file.

Canonical reference: https://www.pvtltd.co/services/section-10-23c-education

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Ready to move this filing forward?

We can help with the filing, the legal mapping, and the follow-up work that keeps the company compliant after submission.

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