Can our organisation (section 8 company) sell the products made by our students as a part of their learning process? If Yes, what should be the percentage of sell in total balance sheet?
- Business income which is incidental to your object (6 limbs under Section 2(15) is charitable income. Pure commercial income is not permitted and has been prohibited in the Income Tax Act 2025. There is no percentage stipulated for incidental business income but since it is incidental it will be a small percentage of your total income. You will have to maintain separate books of accounts and report in 10B/BB and ITR 7 also.
- If commercial receipts pertain to the seventh limbi i.e. advancement of object of general public utility, there is a cap of such receipts not exceeding 20% of total income of the year. The commercial receipts under GPU should be for advancement of GPU is what needs to be ensured. The Income Tax Department looks at commercial receipts under GPU with more scrutiny and reporting has to be done for this separately in Audit Report and ITR.
CS Sharad Bhargava
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