Section 10(42) Exemption for Treaty-Based Non-Profit Bodies and Authorities

Section 10(42) of the Income-tax Act, 1961 provided an income-tax exemption for specified income of a notified non-profit body or authority established, constituted or appointed under a qualifying multilateral treaty, agreement or convention. The exemption depended on both the legal status of the organisation and the Central Government notification.

Meaning of section 10(42)

Under the former section 10(42), specified income arising to a body or authority established, constituted or appointed under a treaty, agreement or convention signed by the Central Government with two or more countries could be excluded from total income where the statutory conditions were met. The organisation must have been established or constituted not for the purpose of profit, and the Central Government had to notify the body or authority and the relevant income.

The words body or authority describe an organisation set up or appointed under the relevant international instrument. Merely having international activities or a charitable purpose is not sufficient to establish eligibility.

Who is eligible and what income is exempt?

Conditions for claiming the exemption

1. International instrument: Identify the treaty, agreement or convention to which the Central Government is a signatory and under which the organisation was established, constituted or appointed.
2. Participation: The qualifying instrument must involve the Central Government and two or more countries as contemplated by the provision.
3. Non-profit character: The founding instrument and actual purpose should establish that the body or authority was not set up for profit.
4. Government notification: Confirm that the Central Government has notified the particular body or authority.
5. Specified income: Match each receipt to the categories of income covered by the notification and the applicable period.
6. Applicable tax year: Check the governing statute for the year concerned, including the Income-tax Act, 2025 for tax years starting from 1 April 2026.

Why the Central Government notification matters

A qualifying treaty alone does not automatically exempt all receipts. The exemption under section 10(42) was notification-based. The notification identifies the qualifying entity and the specified income for which the exemption is available. An entity should retain a copy of the notification and review any limits, dates or amendments.

For example, if a notified non-profit international authority receives both an income stream expressly covered by its notification and an unrelated commercial receipt, the latter is not automatically exempt merely because the recipient is notified. Its treatment requires separate analysis.

Difference from general charitable exemptions

The former section 10(42) was a targeted provision for certain international treaty-based bodies. It should not be confused with the general rules for charitable or religious trusts, exemptions for other statutory authorities, or exemptions granted to specific international organisations under separate legislation or agreements. Each category has different conditions.

How to apply the law from April 2026

The Income-tax Act, 2025, as amended by the Finance Act, 2026 governs tax years beginning on or after 1 April 2026. The 1961 Act continues to govern relevant earlier tax periods and related proceedings. Do not rely on the former section number alone when preparing a current return or exemption claim.

Review the current Act, the notification applicable to the organisation and the nature of the receipt. The fact that a body qualified in an earlier tax year does not remove the need to check its present statutory and notification-based status.

Recommended supporting documents

• Signed treaty, agreement or convention and the establishing instrument.
• Constitution, charter or other records establishing non-profit objectives.
• Central Government notification identifying the body or authority.
• Notification provisions specifying exempt income and effective dates.
• Audited accounts and records allocating income to notified and non-notified categories.
• Tax returns and correspondence relevant to the period concerned.

Official sources and related reading

• Income Tax Department: Tax-free incomes and section 10(42) guidance
• Income-tax Act, 2025, as amended by Finance Act, 2026
• Income Tax Department: Acts, notifications and circulars
• India Code: official legislation
• Income Tax e-Filing portal
• Income exempt under section 10: overview
• Tax-exempt income guide

Frequently asked questions

Is every non-profit international organisation exempt under section 10(42)?

No. The body or authority must satisfy the treaty-related requirements and be notified by the Central Government. Only specified income covered by the notification qualifies.

Does section 10(42) exempt all income of a notified authority?

Not necessarily. The exemption is limited to the specified income notified by the Central Government.

Must the organisation be established under an international agreement?

Yes. The former provision required establishment, constitution or appointment under a qualifying treaty, agreement or convention signed by the Central Government with two or more countries.

Which Act applies from 1 April 2026?

The Income-tax Act, 2025 applies to tax years beginning on or after 1 April 2026. The historical section 10(42) reference concerns the Income-tax Act, 1961.

This material is for general information. The statutory text and applicable Central Government notification govern any particular claim.