ITAT orders tax registration for trust that links women's self-help groups to bank loans
The Chennai bench of the Income Tax Appellate Tribunal held that Annai Trust's work linking poor women's self-help groups to bank credit is relief of the poor, not business.
Key points
- The Income Tax Appellate Tribunal in Chennai set aside an order refusing to renew Annai Trust's charitable registration on 27 October 2026.
- The trust says it serves 1,357 self-help groups through which loans of about Rs 264.84 crore were disbursed, under an agreement with ICICI Bank.
- The tribunal held the work is relief of the poor, so the 20% limit on business receipts does not apply, and ordered registration from 2027-28.
Photo: Fortunny / Wikimedia Commons, CC BY 4.0 (cropped). Representational image.
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has directed the tax department to renew the charitable registration of Annai Trust, a Tiruchirappalli trust that helps poor women form self-help groups and get bank loans. In an order pronounced on 27 October 2026, the tribunal held that this work is relief of the poor and not a business, and set aside an order of 29 December 2025 refusing the renewal.
What Happened
The trust's registration under Section 12AB of the Income-tax Act, which allows a charity to claim tax exemption, was valid till 31 March 2026. It applied for renewal on 19 June 2025. Under an agreement with ICICI Bank, the trust forms and supports self-help groups, teaches money management, offers debt counselling, processes loan applications and monitors the groups, and the bank pays it service charges. According to the trust, it serves 1,357 groups through which loans of about Rs 264.84 crore were disbursed.
The Commissioner of Income Tax (Exemptions) refused renewal, holding that the trust worked as the bank's agent, that about 69% of its receipts came from bank incentives, and that the proviso to Section 2(15) applied because such receipts exceeded 20% of the total. The tribunal disagreed. It held that helping poor women replace informal moneylenders with bank credit falls within relief of the poor, to which the proviso does not apply. It added that, even otherwise, the work was not a business, since the trust ran a deficit of Rs 23,490 in 2021-22 and a surplus of about 1.6% and 3.4% of gross income in the next two years, and does not charge the women.
What It Means
The tribunal directed that the trust be registered for the period the law prescribes, starting from assessment year 2027-28. Under the order, a fee paid by a bank to a charity for financial-inclusion work does not by itself make the charity a business when its charges stay close to cost. The tax department remains free to check, in each year's assessment, whether the trust's income has been applied to its objects and whether the other conditions for exemption are met.
Source: ITAT order
Sources & Citations
- ITAT order — Income Tax Appellate Tribunal