ITAT: Trusts Giving Financial Aid to Students Eligible for Section 80G, Even for Studies Abroad
Tribunal says funds disbursed in India remain charitable, regardless of where students pursue education.
Ruling clarifies law, strengthens trusts’ role in supporting higher education globally.
By Our Legal Correspondent
New Delhi: December 06, 2025:
In a landmark judgment, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has ruled that a charitable trust providing financial assistance to students is eligible for Section 80G approval under the Income Tax Act, 1961, even if the students use the aid to study abroad.
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The ruling came in the case of R. Mangaldas Charitable Trust vs. Commissioner of Income Tax (Exemptions), where the trust’s application for Section 80G recognition was initially rejected by the Commissioner (Exemptions) on the grounds that its object clause included support for students studying overseas.
The ITAT overturned this rejection, clarifying that financial aid disbursed in India in Indian rupees remains a charitable activity, regardless of whether the student studies in India or abroad.
Background of the Case
- The trust filed an application in Form 10AB under Section 80G(5)(iii) seeking approval.
- The Commissioner of Income Tax (Exemptions) rejected the application, citing that the trust’s object clause mentioned support for students studying “in India or abroad.”
- The Commissioner argued that this amounted to “application of funds outside India,” which is not permissible under Section 80G.
- The trust appealed to the ITAT, contending that all disbursements were made in India, in Indian rupees, directly to students or institutions.
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ITAT’s Observations
The Tribunal made several important points:
- Funds disbursed in India: Since the trust provided aid in India, it did not amount to foreign application of funds.
- Charitable purpose upheld: Supporting education, whether in India or abroad, remains a charitable activity.
- No violation of law: Section 80G does not prohibit aid to students studying abroad if funds are disbursed domestically.
- Commissioner’s rejection invalid: The rejection was based on a misinterpretation of law.
The ITAT emphasized that the place of study is irrelevant if the charitable activity—financial aid—is carried out in India.
Why This Judgment Matters
This ruling is significant for several reasons:
- Encourages trusts: Charitable trusts can confidently support students without fear of losing Section 80G approval.
- Supports global education: Students aspiring to study abroad can benefit from Indian charitable aid.
- Clarifies law: Removes ambiguity about “foreign application of funds.”
- Strengthens philanthropy: Encourages more donations to trusts, knowing they qualify for tax benefits.
Impact on Charitable Trusts
For trusts, the ruling means:
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- They can include support for overseas education in their object clauses.
- Donations to such trusts remain eligible for tax deductions under Section 80G.
- They can expand their scope to help students access global opportunities.
This is expected to boost the role of Indian trusts in supporting higher education worldwide.
Impact on Students
For students, the ruling provides:
- Access to aid: More trusts may offer scholarships for overseas education.
- Financial relief: Families can rely on charitable support for expensive foreign studies.
- Encouragement: Students from underprivileged backgrounds can aspire to global education
Expert Opinions
Legal and tax experts welcomed the ruling.
- Chartered Accountants: Say the judgment clarifies a long-standing ambiguity.
- Lawyers: Stress that charitable intent should not be restricted by geography.
- Educationists: Believe the ruling will expand opportunities for Indian students abroad.
According to tax analyst Nidhi Sharma, “The ITAT has rightly held that disbursement in India is the key factor. This ruling will encourage trusts to support education more broadly.”
Challenges Ahead
While the ruling is positive, challenges remain:
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- Monitoring: Authorities must ensure funds are genuinely used for education.
- Transparency: Trusts must maintain clear records of disbursements.
- Awareness: Donors and trusts must be informed of the ruling to benefit fully.
Experts suggest that the CBDT (Central Board of Direct Taxes) should issue guidelines to ensure uniform application.
Global Best Practices
Globally, charitable aid for education is widely recognized:
- United States: Charitable foundations support students studying abroad with tax benefits.
- United Kingdom: Trusts can fund overseas education if charitable intent is clear.
- Australia: Scholarships for international study are considered charitable.
India’s ruling aligns with these practices, strengthening its philanthropic framework.
Conclusion
The ITAT’s ruling that trusts providing financial aid to students are eligible for Section 80G approval even if students study abroad is a milestone in India’s tax and education landscape. By clarifying that funds disbursed in India remain charitable, the Tribunal has removed a major hurdle for trusts and donors.
For students, this opens doors to global education. For trusts, it strengthens their role in supporting learning. As India continues to expand its philanthropic and educational reach, this ruling sets a strong precedent for fairness, clarity, and encouragement of charitable activities.
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