TDS applicable on salaries of nuns, priests in govt-aided schools: SC

The salaries paid to nuns and priests in government-aided Christian schools are subject to tax deducted at source (TDS), the Supreme Court ruled on Friday. TDS is a withholding tax that is levied at the source of income.

 

Dismissing appeals from 100 dioceses and congregations in Tamil Nadu and Kerala, a top court bench led by outgoing Chief Justice DY Chandrachud ruled that salaries paid from government grants are taxable.

 

“The law is common for everybody,” Chief Justice Chandrachud remarked.

 

Senior advocates Arvind Datar and S Muralidhar represented the dioceses in the apex court. They argued that the salaries belonged to the congregation running the schools rather than to the individual nuns or priests. Datar pointed out that compensation for a deceased nun or priest goes to the parish, not to their relatives.

 

During the proceedings, Justice JB Pardiwala noted that since the salaries are paid by the Centre to aided institutions, they are indeed salaries in a true sense.

 

Aided missionary schools had enjoyed this exemption since 1944, until the Centre introduced TDS in 2014. Earlier, the Madras High Court had ruled in favour of the petitioners, but the decision was appealed by the Income Tax Department.

 

In 2021, the Kerala High Court ruled that salaries paid to nuns and priests could be taxed and were not in violation of Article 25 of the Constitution, which guarantees the right to religious freedom in India.

 

In December 2014, the Income Tax Department had directed educational institutions to deduct TDS from teachers' salaries.

 

In January, the apex court agreed to examine the pleas challenging the TDS requirement.