Supreme Court Confirms Income Tax on Salaries of Priests and Nuns in Aided Schools

The Supreme Court has upheld the Madras High Court decision requiring tax deduction at source (TDS) on salaries paid to nuns and priests working as teachers in church-run aided schools. Despite arguments that funds are directed to the diocese for charitable purposes and that priests/nuns face “civil death” under canon law, the court ruled that these salaries remain subject to income tax.

Chief Justice D.Y. Chandrachud explained that while nuns and priests may not retain these funds personally, it does not exempt them from TDS, as the funds are designated as salary grants by the government. The Income Tax Department’s appeal stressed that salaries distributed through schools are taxable, regardless of religious affiliation. Senior advocates argued that priests and nuns have historically been exempt based on CBDT circulars.

This ruling emphasizes tax uniformity and clarifies that salaried income for religious workers in government-aided institutions must comply with tax laws.

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