Income tax guide
Section 10(23BB): Income Tax Exemption for Khadi and Village Industries Authorities
Section 10(23BB) of the Income-tax Act, 1961 deals with income received by or on behalf of an authority established under a State or Provincial Act for the development of khadi or village industries, or both.
Key point: The exemption relates to a qualifying statutory authority, not automatically to every khadi shop, producer, society, public charitable trust or village-industry business. The legal status and statutory purpose of the authority are central to eligibility.
Meaning and scope of Section 10(23BB)
Under the 1961 Act, qualifying income received by or on behalf of an authority established under a State or Provincial Act for the development of khadi or village industries, or both, is excluded from total income under Section 10(23BB). This is an entity-specific exemption, and eligibility should be established from the law creating the authority.
| Eligible assessee | An authority established under a State or Provincial Act for developing khadi or village industries, or both. |
|---|---|
| Income covered | Income received by or on behalf of the qualifying statutory authority. |
| Exemption amount | The qualifying income is excluded from total income, subject to the applicable statutory provision. |
| Primary eligibility test | Existence of an authority created by the relevant State or Provincial legislation for the prescribed development purpose. |
Conditions for eligibility
- Statutory establishment: The entity must be an authority established under a State or Provincial Act; ordinary registration as a society, company or trust does not by itself meet this requirement.
- Development purpose: The authority must be established for the development of khadi or village industries, or both.
- Receipt of income: The income claimed as exempt must be received by or on behalf of that qualifying authority.
- Documentary support: The authority should retain its establishing legislation, financial statements and records identifying income received on its behalf.
Definitions: Khadi and village industries
For this clause, khadi and village industries take their meanings from the Khadi and Village Industries Commission Act, 1956. In broad terms, khadi concerns cloth woven on handlooms in India from hand-spun yarn, while village industries refer to industries falling within the definition and notifications under that Act. The exact statutory wording and relevant notifications should be consulted for classification.
Difference between Sections 10(23B) and 10(23BB)
These are separate exemptions. Section 10(23B) concerns certain approved institutions associated with development of khadi or village industries, whereas Section 10(23BB) addresses an authority established under a State or Provincial Act for that development. Approval rules applicable to one provision should not automatically be applied to the other.
Practical example
If a State law establishes an authority specifically to develop khadi and village industries, income received by that authority may qualify for exclusion under Section 10(23BB) for the years to which the 1961 Act applies. A private enterprise manufacturing khadi products cannot claim the same exemption merely because its products are khadi.
Applicable law and transition
This article explains the historical Section 10(23BB) provision in the Income-tax Act, 1961. The Income-tax Act, 2025 applies from 1 April 2026, subject to its commencement, saving and transition provisions. For a current tax year, confirm the corresponding provision in the legislation applicable to that year rather than relying solely on the older section number.
Official references
Check the Income Tax Department for statutory material, the Income Tax e-Filing Portal for compliance resources, India Code for the Income-tax Acts and the Khadi and Village Industries Commission Act, 1956, and the Khadi and Village Industries Commission for sector information.
Related tax information
Read Section 10 exempt incomes, tax-free income guidance, Chapter VI-A deductions, return filing resources and advance tax information.
Legal provisions and applicability depend on the relevant tax year and statutory status of the authority. Consult the applicable enacted law and official guidance.