The Central Board of Direct Taxes (CBDT), acting on behalf of the Central Government, has issued a new tax relief measure through Notification No. 112/2026, dated August 11, 2026. Under this notification, the District Legal Service Authority in Panchkula has been granted an income-tax exemption under Section 10(46) of the Income-tax Act, 1961.
Notably, this exemption status is protected under the transitional provisions of the newly updated Income-tax Act, 2025.
Eligible Income Sources for Exemption
It is important to note that this is not a blanket tax exemption. Instead, it applies exclusively to specific types of income earned by the authority. As per the official notification, the following income sources will be considered tax-free:
- Government & Authority Grants: Any grants received from the Punjab and Haryana High Court, the National Legal Services Authority (Central Authority), and the Haryana State Legal Services Authority.
- Donations: Grants or financial donations provided by the Central Government or the Haryana State Government under the Legal Services Authorities Act, 1987.
- Court Orders: Any monetary amounts received as per the directives or orders of a Court.
- Application Fees: Amounts collected from candidates as recruitment application fees.
- Bank Interest: Any interest earned on funds kept in bank deposits.
Mandatory Conditions for the Exemption
To successfully claim and maintain this income tax exemption, the District Legal Service Authority, Panchkula must strictly comply with a set of guidelines laid down by the Finance Ministry:
- Restriction on Commercial Activities: The authority is completely prohibited from engaging in any commercial or business-related activities.
- Consistency in Operations: The fundamental nature of the authority’s activities and its specified income sources must remain unchanged across the financial years.
- Mandatory ITR Filing: The authority is legally required to file its Income Tax Returns (ITR) consistently, following the rules outlined in Section 139(4C)(g) of the Income-tax Act, 1961.
If the authority fails to follow any of these conditions, the exemption will be withdrawn immediately, and penal actions will be initiated under the Income-tax Act.
Applicable Assessment Years
Bringing retrospective tax relief, the CBDT has clarified that this exemption will be valid for four consecutive Assessment Years. It officially applies to the Assessment Years 2023-24, 2024-25, 2025-26, and 2026-27 (which correspond to the Financial Years spanning from 2022-23 to 2025-26).
Read Income Tax Notification No. 112/2026
