Collection of advance tax by educational institutions

Amount paid as scholarship not to be subject to collection of advance tax by educational institutions [Section 236I]

Collection of advance tax by educational institutions: In terms of section 2361 of the Ordinance, a person preparing a fee voucher or challan was obliged to collect/charge advance tax @ 5% from a person on the amount of fee paid to an educational institution such as schools, colleges, universities, tuition centers etc.

However, such advance tax under section 2361 of the Ordinance was not to be collected in instances where annual fee was upto Rs.200,000/- and in the case of a person who is a non-resident, subject to the furnishing of various documentation as enunciated in sub-section (6) of section 2361 of the Ordinance.

In order to alleviate the hardship of persons whose educational fees are being paid through a scholarship, appropriate amendment has been made in sub-section (3) of section 2361 of the Ordinance through the Finance Act, 2018 wherein it has been stipulated that advance tax under section 236I of the Ordinance shall not be collected on an amount which is paid by way of scholarship.

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