According to IT Department sources, the need for increased scrutiny comes following the department's own report for last fiscal which mentions that "educational institutions" among other "various sectors" have indulged in huge "tax evasions".
Last fiscal, the department detected an overall tax evasion of over Rs 3,400 crore by various sectors including the education sector.
Section 10 (23) (C) of the Income-Tax Act, 1961 provides that the income received by educational societies, which exist solely for educational purposes and not for the purpose of profit, shall not be subjected to tax.
The IT department exempts educational trusts and institutions enjoying "tax benefits" from the Act. But officials say that as education by definition is considered a "charitable act", some institutions "divert" the money and thereby rob the exchequer of its legitimate tax.
Apart from donation money, which generally remains unaccounted, some institutions levy capitation fee, establishment and other charges from candidates.
Income under these heads are not solely related to dissemination of education and are diverted to fund the "commercial and private enterprise" of the institute concerned, sources say.
