CBDT Grants Retrospective Tax Exemption to Baddi Barotiwala Nalagarh Development Authority

The Ministry of Finance (Department of Revenue) has recently issued a notification dated July 14, 2025, under the Central Board of Direct Taxes (CBDT), regarding income tax exemption. The Central Government has declared the Baddi Barotiwala Nalagarh Development Authority (having registered PAN AAALB0528J), set up by the State Government of Himachal Pradesh, as tax-exempt, in exercise of its powers granted under clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961).

This clause allows the Central Government to declare certain types of income of government-authorised bodies exempt from income tax if they serve public purposes and follow specific conditions. Below are listed these conditions:

• Authorities must not be engaged in any commercial activities, i.e., they should not run businesses for profit. Meaning activity should be for the public welfare.
• Their activities and the types of income mentioned above must remain the same during the financial years. That means they cannot suddenly begin new activities or earn money in other ways.
• They must file their income tax return every year according to clause (g) of sub-section (4C) of section 139 of the Income-tax Act. This clause requires specified institutions to file their income tax returns even if they don’t have taxable income.

The following types of income earned by the Baddi Barotiwala Nalagarh Development Authority are declared exempt from income tax:

• Income earned on grants received from the Central Government and the State Government of Himachal Pradesh;
• Revenue Receipts under the HP Town and Planning Act, 1977; and
• Interest earned on bank deposits.

This means the authority does not have to pay tax on these three types of income sources. Interestingly, this notification is retrospective, meaning it is being applied to previous years.

Specifically, it applies to the assessment years:

• 2014-2015
• 2015-2016
• 2016-2017
• 2017-2018
• 2018-2019

These correspond to the financial years:

• 2013-2014
• 2014-2015
• 2015-2016
• 2016-2017
• 2017-2018

Therefore, even though the notification is published in 2025, it is applicable to income earned in those earlier years. The authority will not be taxed on the specified income for those years, either.