CBDT Grants Tax Exemption to DPCC: What the Notifications Really Mean

CBDT issued Tax Exemption Notification to Delhi Pollution Control Committee:

If you follow Indian income tax notifications at least remotely, it's likely that you have come across the title of another notification circulating around - income tax exemption notification to the Delhi Pollution Control Committee has been issued by the government but there's a caveat – it only applies to non-commercial functions. In isolation, this is just some formality involving another statutory body but scratch a little deeper and it speaks volumes about the approach of the Central Board of Direct Taxes regarding exempting government entities at a time when India is operating under two income tax Acts - the old one and the new one.

Here's a detailed analysis of what has changed, why there were two notifications rather than one and what it signifies for those who keep an eye on the process of income tax exemption to public bodies in India.

Notifications issued for Tax Exemption

In July 2026, the Ministry of Finance issued two notifications back-to-back, both concerning the Delhi Pollution Control Committee (DPCC), Delhi's principal pollution regulator functioning much like a state pollution control board for the National Capital Territory.

1. Notification No. 86/2026 grants income tax exemption to DPCC under Section 10(46) of the now-repealed Income-tax Act, 1961, covering assessment years 2024-25 to 2026-27.
2. Notification No. 87/2026 grants a parallel exemption under Schedule III read with Section 11 of the new Income-tax Act, 2025, covering tax years 2026-27 and 2027-28.
3. Both exemptions apply only to specified, non-commercial receipts, not to DPCC's income at large.

Put simply, the CBDT income tax exemption ensures DPCC does not lose the benefit of Section 10(46)-style relief just because the underlying law changed. It bridges both statutes so there is no gap in coverage.

What is under CBDT Tax Exemption Notification

Under CBDT Tax Exemption Notification No. In 86/2026, the Central Government, using Section 10(46) of the Act of 1961, granted exemption of certain receipts of DPCC, which are as follows:

1. Grant received from the Government of NCT of Delhi or Central Government
2. Fees of consent and licence fee under the laws of environment
3. Penalty and fine under pollution control laws
4. Interest on surplus and unutilized amounts

It is interesting to note that in this notification, one aspect has been clarified, which is very significant in a way that although the 1961 Act has been repealed, however, the exemptions for the period preceding 1 April 2026 remain valid, since Section 536 of the Income-tax Act, 2025 keeps such rights and liabilities alive.

Notification No. 87/2026 then does the forward-looking part of the job. It uses Schedule III read with Section 11 of the 2025 Act — the provision that now governs exemptions for statutory bodies going forward — to extend a matching exemption for tax years 2026-27 and 2027-28. Together, the two notifications mean DPCC's exempt status carries through the changeover from the old regime to the new one without a break.

  The Non-Commercial Condition of CBDT Tax Exemption

This is the part of the story that deserves the most attention, because it is not a formality. Both notifications make it explicit that the exemption holds only for so long as DPCC does not engage in any commercial activity. If DPCC were to start generating income from trade, business, or commerce-like operations, that portion of income would fall outside the shelter of income tax exemption altogether.

It is consistent with CBDT’s view expressed on similar occasions in relation to other notifications of exemption for statutory and regulatory authorities – exemption is granted only when the authority performs its public function and not when it engages in business which is in competition with others in the market.

 Compliance Obligations DPCC Must Continue to Meet Tax Exemption

An income tax exemption of this kind is never unconditional, and these notifications are no exception. DPCC should be under obligation to:

1. Submit its income tax return by the appropriate due date in accordance with Section 139(4C)(g) of the 1961 Act (retrospective) and Section 263(9)(c)(xiii) of the 2025 Act (forward-looking)
2. Maintain its sources of income without deviation from what is prescribed in the notifications, i.e., grants, fees, penalties, and interest on the excess funds
3. Avoid engaging in any business transactions that would lead to a deviation from being a body functioning merely for the purpose of regulation
4. Should there be a failure on the part of DPCC to fulfill any of the above requirements, the exemption would be revoked, and the notifications themselves caution about a penalty as well.

This is a reminder that CBDT income tax exemptions to government bodies are conditional grants, not permanent entitlements — they can be reviewed, and they can be revoked.

Which Authority Issued Tax Exemption

The exemption itself was notified by the Central Government, acting through the Ministry of Finance, on the recommendation and administration of the Central Board of Direct Taxes. The CBDT is the apex body that oversees direct tax administration in India, and Section 10(46) notifications (and their 2025 Act equivalent under Section 11 and Schedule III) are issued in its domain. Anyone searching for how CBDT grants tax exemption to Delhi Pollution Control Committee is really asking about this exact mechanism — a government notification, backed by CBDT's administrative process, that carves out specified income of a statutory body from the tax net.

Timeline at a Glance

Notification No. 86/2026 — issued under the 1961 Act, covering AY 2024-25 to AY 2026-27

Notification No. 87/2026 — issued under the 2025 Act, covering tax years 2026-27 and 2027-28, dated 16 July 2026

Both notifications reference the transitional bridge created by Section 536 of the 2025 Act

Read together, this timeline shows a body of income tax law in active transition, where old exemptions are being carried forward rather than lapsing simply because the statute changed.

Delhi Pollution Control Committee – Who Are They?

The Delhi Pollution Control Committee, which can be mistakenly referred to as a Delhi pollution control board, is an organization charged with the task of implementing environmental laws in Delhi. Its operations are similar to those of a state pollution control board, whereby it gives consents, monitors industrial emissions, implements the Water and Air Acts, and punishes polluting units. Because it is a regulatory body rather than a commercial enterprise, its income largely comes from government grants, statutory fees, and penalties rather than trade or business activity. It is precisely because of this that the income tax exemption for Delhi becomes relevant in this case – organizations carrying out sovereign or regulatory functions are regularly exempted from tax on income arising from such functions, as long as they don’t venture into commercial activities.

Why CBDT Tax Exemption Notification is Important?

On its face, this is a story about one statutory body in Delhi. But it is also a useful case study in how India is managing the shift from the Income-tax Act, 1961 to the Income-tax Act, 2025. Government bodies, regulators, and statutory committees across the country rely on exemptions like Section 10(46) to keep functioning without a tax burden on grants and statutory fees. The DPCC notifications show the mechanics of how that continuity is being engineered — through savings provisions like Section 536, paired with fresh notifications issued under the new Act's Schedule III and Section 11 framework.

For tax professionals, company secretaries, and compliance teams tracking notifications from the Ministry of Finance and the CBDT, this is a template worth remembering. It will be necessary for any statutory or regulatory body which currently holds a Section 10(46) exemption under the 1961 Act to have an analogous notification under the 2025 Act in order to avoid the possibility of a tax gap and in the case of DPCC it was seen precisely how the procedure is followed in this respect.

How CorpZo Can Help in Tax Exemption

It is hardly possible to determine whether there is an income tax exemption for a statutory body, a trust, a society or a government-linked company as it depends on the specific notification, the type of income, as well as strict compliance with the conditions attached. CorpZo assists regulatory authorities, charitable organizations and companies in India in interpreting CBDT notifications, checking the conditions of exemptions, preparing and filing the necessary returns under both income tax regimes. If your organization needs help with a similar exemption or just wishes to learn how the changeover from the 1961 Act to the 2025 Act affects you, our compliance team will help you do it end to end.

Frequently Asked Questions

1. What is the Delhi Pollution Control Committee?

It is the statutory agency that regulates pollution and environment in Delhi, and its functions are like those of the state pollution control board.

2. Why did CBDT issue two different notifications when one would have been enough?

Because India has two different acts regarding income tax, which are effective during two different periods, the repealed 1961 Act and the new 2025 Act, from 2025-26 onwards. Two notifications were needed to cover both periods without a gap.

3. Is DPCC's entire income tax-exempt?

No. This exemption is applicable only to certain receipts, such as government grants, statutory fees, penalties, and interest on excess receipts, provided that DPCC does not become involved in any commercial activity.

4. If DPCC becomes involved in any commercial activity, what would happen to the exemption?

In such circumstances, the exemption will no longer be available in respect of the concerned income, and there could be penal consequences due to non-compliance with the terms of the notification.

5. Is the notification applicable to the other pollution control boards in the other States of India?

No. It is applicable only to DPCC with respect to the concerned notifications.