Taxation is basically the imposition of compulsory levies on individuals or entities by government. Taxes are levied primarily to raise revenue for government expenditures and realization of the obligations of government. Ironically, one of the challenges of the Nigerian government today is meeting up with the agreed obligations such as capital and revenue expenditures. Plugging tax leakages in the administration of tax becomes particularly more pertinent in order to justify the moral right to impose tax. Hence, it is imperative to bring in all the channels of tax leakages with in the tax net of the Revenue Authority. Tax exemption granted to religious institutions, privately owned educational institutions and non-governmental organisations has been argued as one of the channels of tax leakages. Although, in Nigeria, religious institutions, educational institutions and non- governmental organisations of a public character are exempt from tax; both under Section 23(c) of the Companies Income Tax Act, Section 19 and Paragraph 13 of the Third Schedule of the Personal Income Tax Act. However, the exemption applies only to the extent that the profit does not relate to a trade or business carried on by such institution. Nonetheless, these bodies have taken undue advantage of their tax free income to establish businesses and other investments. This paper examines the propriety for the grant of tax exempt status to these bodies in view of their engagements in trade and business. Thus, the paper advocates for the legitimization of taxation with respect to all income of these bodies.