So if you may be as rich as Mukesh Ambani but unless some benevolent person has started a school under a charitable trust there is no chance that you get your child educated. No matter how high the fees are or how good the facilities are; all schools in India are by law required to be run under “charitable trust” or section 25 company (which means its not for profit). These charitable trust cannot make profit and whatever surplus they have has to be reinvested in the objectives of the trust.

It doesn’t matter how much fees the school charges or the facilities it provides. The school may be in a congested city area or it can be far in a remote village. Wherever it is the formation of the entity has to be “not for profit”. There is a small except though- in the state of Haryana alone there is no such requirement. The schools there can be for profit and run by companies / individuals / partnerships. There are a few high end schools which have world class facilities which are based in Gurgaon.

Such entities are exempt from Income Tax provided that it spends all of the surplus earned in the same year (or the very next) there is no income tax to be paid. The Income tax authorities are debating why a school which serves to the rich should be exempt from income tax. An international board with all AC classrooms caters to Bollywood starts in Mumbai which charges Rs. 10 lakhs per annum. So should it be given tax exmpltion? However any such move will be unconstitutional and will take a long time to be implemented.

Is it good to have such a law in India?
Both. Good because education is a difficult to measure service and unless its heavily regulated there can be a major cheating. Parents are unable to judge what is proper for their child and may get brainwashed with a lot of advertisements.

A counter argument that it is bad to run school “not for profit” is that it keeps investments low. Any investor would want to invest in a place where he can get return of money and income. If you donate money to a trust, there is no returning back. The money is gone for ever. This leads to shortage of good schools in the long run.

I don’t know what the right answer to this problem is. But one thing we all know for sure is that making a good school requires a lot of money and without attracting crores of investment in this sector we cannot provide high quality education to the masses.