TaxTMI 
TaxTMI 
What should be the treatment of waiver principal and interest of term loan sought by charitable society(registered under section 12A) , keeping in view the provision of section 11(1) of the Income Tax Act, 1961.
Treatment of waiver of loan by bank
14 Oct 2020 
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Waiver of loan: whether forgiven principal and interest to a charitable society qualify as exempt income under charitable income rules.
Whether a bank's waiver of principal and interest of a term loan to a registered charitable society is taxable or exempt under section 11(1) depends on classification of the waiver as accreted income versus a capital or non-income receipt, the timing and mechanism of accrual, the society's registered charitable status and application of the benefit to charitable purposes, and the factual nature of the waiver (voluntary forgiveness, settlement, or restructuring). (AI Summary)
Whether a bank's waiver of principal and interest of a term loan to a registered charitable society is taxable or exempt under section 11(1) depends on classification of the waiver as accreted income versus a capital or non-income receipt, the timing and mechanism of accrual, the society's registered charitable status and application of the benefit to charitable purposes, and the factual nature of the waiver (voluntary forgiveness, settlement, or restructuring). (AI Summary)