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.