Special provision in case of trade, profession or similar association
[Section-50 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 50(1) of Income Tax Act 2025
50(1) Irrespective of anything to the contrary contained in this Act, if, during the tax year, the amount received by a specified association from its members falls short of the expenditure incurred by such association solely for the protection or advancement of common interest of its members, then the amount so falling short shall be allowed as deduction from the income of such association under the head “Profits and gains of business or profession” and the remaining amount, if any, from its income under any other head.
Section 50(2) of Income Tax Act 2025
50(2) For the purposes of sub-section (1),––
- (a) “specified association” means any trade, professional or similar association, not covered in Schedule III (Table: Sl. No. 24), whose income or its part is not distributed to its members (other than as grants to any associations or institutions affiliated to it);
- (b) the amount received by the specified association from its members shall include amount by way of subscription or otherwise, and shall not include any remuneration received by the association for rendering any specific services to such members;
- (c) expenditure incurred by specified association shall not include––
- (i) expenditure deductible under any other provision of this Act; and
- (ii) any capital expenditure.
Section 50(3) of Income Tax Act 2025
50(3) The effect of other provisions of this Act relating to carry forward and set off of brought forward losses or allowances shall be given before allowing deduction under sub-section (1).
Section 50(4) of Income Tax Act 2025
50(4) The maximum allowable deduction under this section shall not exceed 50% of the total income as computed before allowing deduction under this section.
FAQs on Section 50 of Income Tax Act 2025
1. What is the purpose of Section 50 of the Income Tax Act, 2025?
Section 50 provides relief to specified associations by allowing a deduction when their expenditure incurred for the common interest of their members exceeds the amount received from those members during the tax year.
2. What is a “specified association” under Section 50?
A “specified association” refers to a trade, professional, or similar association:
- Not covered under Schedule III (Table: Sl. No. 24);
- Whose income or part thereof is not distributed to its members (except grants to affiliated associations/institutions).
3. What kinds of receipts from members are considered under this provision?
Only amounts received by way of subscription or otherwise are considered. However, remuneration for specific services rendered to members is excluded.
4. What kind of expenditures qualify for deduction under Section 50?
Only those expenditures incurred solely for the protection or advancement of the common interest of its members qualify, provided they are:
- Not deductible under any other provision of the Act;
- Not capital in nature.
5. Is there any cap on the deduction that can be claimed under Section 50?
Yes. The maximum deduction under Section 50 cannot exceed 50% of the total income (as computed before allowing the deduction under this section).
6. Can the association claim deduction under Section 50 even if it earns income under other heads?
Yes. If the shortfall of member contributions exceeds qualifying expenditure, the deduction is allowed first from income under “Profits and gains of business or profession” and the balance, if any, from income under any other head.
7. What is meant by “shortfall” for the purposes of this section?
Shortfall refers to the excess of qualifying expenditure incurred for common interest over the amount received from members (excluding remuneration for specific services).
8. Can capital expenditure be considered for deduction under Section 50?
No. Capital expenditure is expressly excluded from the qualifying expenditure under this section.
9. Are expenditures already deductible under other provisions eligible under Section 50?
No. If an expenditure is already allowed as a deduction under another section, it cannot be claimed again under Section 50.
10. How are carried forward losses and allowances treated under this provision?
Before claiming a deduction under Section 50(1), all provisions relating to carry forward and set-off of brought forward losses and allowances must be applied.
11. Can an association distribute any part of its income to its members and still claim benefit under Section 50?
No. If any part of the income is distributed to members (except as grants to affiliated associations/institutions), the association does not qualify as a “specified association”.
12. Does the section allow deductions for expenses incurred for purposes other than common interest?
No. Only expenditure solely for the common interest of members is eligible.
13. Will fees or charges for training, seminars, or conferences be considered “specific services”?
If such activities are rendered specifically to members against remuneration, they may be treated as specific services and the receipts excluded from the member contributions considered under Section 50.
14. How is “total income” computed for the purpose of the 50% cap on deduction?
It is the income computed under normal provisions of the Act (i.e., after giving effect to carry forward/set-off provisions) but before allowing deduction under Section 50.
15. Is there a specific form or declaration to be submitted for claiming this deduction?
The Act does not prescribe a specific form in Section 50. However, supporting documentation and justification of qualifying expenditure and member receipts must be maintained for assessment purposes.
Section 50 of the Income Tax Act, 2025 introduces a targeted relief mechanism for trade, professional, and similar associations that operate non-profitably for the common benefit of their members. By allowing a deduction for the shortfall between qualifying expenditure and member contributions (subject to a cap of 50% of total income), it ensures that such associations are not penalized for prioritizing member welfare over revenue generation.
However, strict conditions apply regarding the nature of receipts, expenditure, and non-distribution of income, making compliance and documentation crucial. Associations must carefully evaluate their income and expenditure patterns to fully leverage this provision while remaining within the prescribed limits.
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