Section 10(23C) Exemption to Educational, Medical, Charitable & Religious Institutions

Introduction

Section 10(23C) of the Income-tax Act provides tax exemption to specific funds and institutions engaged in educational, medical, charitable, or religious activities. The exemption is available either unconditionally or subject to approval and fulfilment of prescribed conditions.

Scope of Section 10(23C)

This clause exempts the income of specified institutions from total income. It applies to:

• Certain Government-established funds (unconditionally exempt);
• Educational and medical institutions substantially financed by the Government or with annual receipts not exceeding Rs. 5 crore;
• Other eligible institutions, upon approval by the Principal Commissioner or Commissioner.

Categories of Exempt Institutions

• Institutions Not Requiring Approval

The following are exempt unconditionally or based on defined thresholds:

– Funds under sub-clauses (i) to (iiiaaaa), including:

➢ Prime Minister’s National Relief Fund

➢ PM CARES Fund

➢ PM Fund for the promotion of Folk Art

➢ PM Aid to Students Fund

➢ National Foundation for Communal Harmony

➢ Swachh Bharat Kosh

➢ Clean Ganga Fund

➢ Chief Minister’s Relief Fund

➢ Lieutenant Governor’s Relief Fund

– Educational and medical institutions under sub-clauses (iiiab) to (iiiae) that are:

➢ Wholly or substantially financed by the Government, or

➢ Having annual receipts not exceeding Rs. 5 crore.

– Institutions Requiring Approval

Exemption under the following sub-clauses is available only upon approval by the Principal Commissioner or Commissioner:

• Sub-clause (iv): Funds or institutions established for charitable purposes
• Sub-clause (v): Trusts or institutions wholly for public religious or public religious and charitable purposes
• Sub-clause (vi): Universities or educational institutions existing solely for education and not for profit
• Sub-clause (via): Hospitals or institutions for medical or rehabilitative care operating solely for philanthropic purposes and not for profit

Conditions for Claiming Exemption

♦ Approval by Competent Authority

Institutions claiming exemption under sub-clauses (iv), (v), (vi), or (via) of Section 10(23C) must apply for approval in the prescribed form and manner. Approval can be provisional (up to 3 years) or final (up to 5 years). Approval becomes inoperative if the institution is notified under Section 10(46) or 10(46A).

Note: No new applications for approval or provisional approval under Section 10(23C) shall be entertained on or after 01-10-2024. The approval shall be granted by the Principal Commissioner or Commissioner only if the application for approval is made before 01-10-2024. Existing approvals remain valid until expiry, after which the institution may apply under the Section 12A regime.

♦ Computation of Income

The manner of computation differs depending on whether the institution requires approval.

• Computation for Institutions not requiring Approval

➢ Includes Government funds and educational/medical institutions.

➢ Government funds are exempt without return filing.

➢ Educational and medical institutions must file returns under Section 139(4C), but are allowed unrestricted accumulation of income.

➢ No threshold limit or specific time for application of income applies.

• Computation for Institutions Requiring Approval

➢ Income includes donations and receipts from main and incidental objects.

➢ Deduct application of income (revenue/capital expenditure, permitted corpus usage, loan repayments).

➢ Accumulation allowed:

• • • Up to 15% of income without restriction
    • Additional accumulation for 5 years, subject to compliance.

Additional Inclusions:

➢ Disallowances for TDS default, cash payments, or misuse of accumulated income

➢ Anonymous donations (taxable under Section 115BBC)

♦ Key Points in Income Computation

➢ Inclusions: All income under Section 2(24), including donations.

➢ Commercial Activities:

• • Must be incidental and supported by separate books.
  • For ‘general public utility’ objects, commercial receipts must not exceed 20% of total receipts.

➢ Anonymous Donations: Taxable if exceeding limits prescribed in Section 115BBC.

➢ No Other Exemptions: Only agricultural income is excluded.

➢ No Deduction for:

• • Corpus donations given to other institutions
  • Expenditure out of corpus or loans (unless repaid and reinvested as per rules)
  • Payments exceeding Rs. 10,000 made in non-permissible modes
  • Payments without TDS (30% disallowed)
  • Benefits to related persons under Section 13(3)

➢ Claim of Depreciation: Not allowed on assets acquired from income already treated as application.

➢ Set-off of Losses: Not permitted for excess application from prior years.

➢ Application on Payment Basis: Allowed in the year of actual payment only.

➢ Accumulation: Permissible up to 15%, or for specific purposes for 5 years.

♦ Treatment of Special Receipts

➢ Corpus Donations: Exempt if invested in Section 11(5) modes.

➢ Voluntary Donations for Religious Renovations: May be treated as corpus if conditions are met.

➢ Donations in Kind: Counted as income and treated as an application if used for charitable purposes.

♦ Special Computation Scenarios – Applicable when books are not maintained, accounts are not audited, return not filed, or conditions of Section 2(15) are violated:

➢ Only revenue expenditure allowed, excluding:

• • Expenditure from the corpus or loans
  • Capital expenses
  • Depreciation on assets which have already been claimed as application
  • Payments in cash or without TDS
  • Donations to others

➢ No deduction shall be allowed in respect of any expenditure or allowance or set-off of any loss under any other provision of the Act.

♦ Investment of Funds

Funds must be invested in modes specified under Section 11(5), except for certain grandfathered or notified assets. Non-compliance renders the relevant income taxable under Section 115BBI.

♦ Books of Account

Institutions having income before exemption exceeding the basic exemption limit must maintain books of account in the prescribed form and manner.

♦ Audit Requirement

Audit by a Chartered Accountant is mandatory for institutions having income before exemption exceeding the basic exemption limit, and the report (Form 10B or 10BB) must be filed one month before the due date under Section 139(1).

♦ Filing of Return

Institutions must file their return within the timelines under Section 139(1) or 139(4). Exemption is not allowed if the return is filed under Section 139(8A).

♦ Other Provisions

• Mutual Exclusivity with Section 11/12 – Institutions must choose between registration under Section 12AB and approval under Section 10(23C); both cannot be availed simultaneously.
• Tax on Anonymous Donations – Taxable under Section 115BBC if exceeding Rs. 1 lakh or 5% of total donations. Only the excess is taxed.
• Merger of Trusts – Merger is allowed under Section 12AC, subject to conditions. Chapter XII-EB does not apply if conditions are fulfilled.
• Tax on Accreted Income – Tax is levied at the maximum marginal rate in cases of conversion, merger with non-eligible entities, or non-transfer of assets on dissolution.
• Special Tax Rate under Section 115BBI – Specific incomes not qualifying for exemption are taxed at special rates, including income not applied for charitable purposes or invested in impermissible modes.

Accumulation of Income by Fund or Institution Approved under Section 10(23C)

Funds or institutions approved under Section 10(23C) may accumulate income for future application to specified purposes, subject to prescribed conditions. Accumulation beyond 15% requires a declaration and compliance with investment norms.

♦ Conditions for Accumulation

Income accumulated in excess of 15% shall not be included in total income if the following are satisfied:

• A statement in Form 10 is submitted, specifying the purpose and period of accumulation;
• The accumulated amount is invested in modes specified under Section 11(5);
• Form 10 is furnished on or before the due date under Section 139(1) for filing the return of income.

♦ Period of Accumulation

The maximum period for which income can be accumulated is 5 years. Any period during which the application is stayed by a court order is excluded from this period.

♦ Taxation of Accumulated Income

Accumulated income shall be taxed if:

• Applied for purposes other than the approved objects;
• Ceases to be accumulated;
• Ceases to remain invested in specified modes;
• Not utilised within the stipulated 5-year period;
• Credited or paid to another registered or approved institution.

♦ Change in Purpose of Accumulation

If accumulated income cannot be applied for its original purpose due to uncontrollable circumstances, the institution may apply to the Assessing Officer for a change in purpose, subject to:

• The new purpose being within India;
• The new purpose aligns with the institution’s approved objects;
• No payment is made to other trusts or institutions registered under Section 12AB/12AA or approved under Section 10(23C).

Cancellation of Approval under Section 10(23C)

Approval or provisional approval granted under Section 10(23C) may be cancelled by the Principal Commissioner or Commissioner (PCIT/CIT) if a “specified violation” is found to have occurred in any previous year.

♦ Grounds for Cancellation

The PCIT/CIT may initiate cancellation in the following cases:

• On detecting one or more specified violations during any previous year;
• On receipt of a reference from the Assessing Officer under the second proviso to Section 143(3);
• If the case is selected under the Board’s risk management strategy.

♦ Specified Violations

A fund or institution shall be considered in violation if:

• Income is applied for purposes other than the approved objects;
• It has business income not incidental to its objectives;
• It fails to maintain separate books for incidental business;
• Its activities are not genuine or not aligned with the approval conditions;
• It fails to comply with any material legal requirement, and such failure is established by a final order or decree;
• The application for approval is incomplete or contains false or incorrect information.

♦ Procedure for Cancellation

The PCIT/CIT must:

• Call for information or conduct inquiries to verify any specified violation;
• Provide the institution with a reasonable opportunity of being heard;
• If satisfied of a violation, pass a written order cancelling the approval for the relevant and subsequent years;
• If not satisfied, pass a written order refusing cancellation.

A copy of the order must be forwarded to the Assessing Officer and the concerned institution.

♦ Time Limit for Passing Order

The cancellation or refusal order must be passed within 6 months from the end of the quarter in which the first notice seeking documents or information was issued.

Taxation of Charitable and Religious Trusts

Introduction

Charitable and religious trusts are eligible for exemption under Sections 11 to 13 of the Income-tax Act, subject to registration under Section 12AB and compliance with prescribed conditions. Section 10(23C) also provides an exemption for certain specified institutions.

Exemption under Section 10(23C)

Exemption is available to specified funds or institutions (e.g., PM CARES, educational institutions, hospitals, charitable or religious institutions). No new application for approval under Section 10(23C) is permitted to be filed on or after 01.10.2024. The approval shall be granted by the Principal Commissioner or Commissioner only if the application for approval is made before 01-10-2024. Existing approvals remain valid until expiry, after which the institution may apply under the Section 12A regime.

Exemption under Sections 11 and 12

Income from property held under trust is exempt if applied/accumulated for charitable/religious purposes and other specified conditions are fulfilled under Sections 11 to 13.

♦ Meaning of Charitable Purpose [Section 2(15)]

Section 2(15) of the Income-tax Act defines “charitable purpose” through seven limbs—six specific and one general. The last limb, “advancement of any other object of general public utility, ” restricts commercial activities beyond a prescribed threshold.

• Relief of the Poor
• Education
• Yoga
• Medical Relief
• Preservation of Environment, including watersheds, forests, and wildlife
• Preservation of Monuments or Artistic/Historic Objects
• Advancement of any other object of General Public Utility – A residuary category covering other charitable purposes. However, if activities involve trade, commerce or business (or related services) for a fee, it ceases to be a charitable purpose unless:

➢ Such activity is undertaken in actual advancement of the object; and

➢ Aggregate receipts from such activity do not exceed 20% of the total receipts of the trust during that previous year.

This restriction does not apply to the first six limbs of charitable purpose, which can carry out business activities without the 20% cap if incidental to their objects.

♦ Conditions for claiming exemption

Section 12A prescribes the conditions that a charitable institution must fulfil to be eligible for exemption under Sections 11 and 12. Among these essential conditions are registration under Section 12AB, maintenance of books of account, audit of accounts, and filing of the income tax return.

♦ Procedure for Registration of Trusts

Section 12AB governs the registration of charitable or religious trusts. Registration is mandatory to claim exemptions under Sections 11 and 12. The new regime includes provisional registration (valid up to 3 years) and final registration (granted for 5 or 10 years). Trusts registered before 31-03-2021 under Section 12AA must re-register under Section 12AB.

▪ Scheme of Registration under Section 12AB – Registrations fall into three categories:

➢ Re-registration of Existing Trusts [Section 12AB(1)(a)]

➢ Normal Registration [Section 12AB(1)(b)]

➢ Provisional Registration [Section 12AB(1)(c)]

♦ Re-registration of Existing Trusts – Trusts with registration under Section 12A/12AA must apply for re-registration in Form 10A . The deadline, initially 30-06-2021, has been extended to 30-06-2024.

➢ PCIT/CIT must grant registration within 3 months without conducting enquiries.

➢ Validity: 5 years (or 10 years if eligible).

♦ Normal Registration – Applicable in the following cases:

➢ Renewal of expiring registration

➢ Conversion from provisional to regular registration

➢ Reactivation of inoperative registration

➢ Modification of objects

➢ Direct registration after commencement of activities

➢ Application must be filed in Form 10AB within the stipulated timelines.

➢ PCIT/CIT may conduct enquiries and verify the genuineness of activities and compliance with applicable laws.

➢ Registration is granted or denied within 6 months from the end of the quarter in which the application is received.

➢ Validity: 5/10 years.

♦ Provisional Registration – Applicable where the trust has not commenced activities.

➢ Application to be filed in Form 10A at least one month before the relevant previous year.

➢ PCIT/CIT must grant provisional registration within one month.

➢ Validity: 3 years from the assessment year for which registration is sought.

➢ Must be converted to regular registration at least 6 months before expiry or within 6 months of activity commencement.

♦ Condonation of Delay – Delayed applications under any clause of Section 12A(1)(ac) may be condoned by the PCIT/CIT if reasonable cause is shown.

♦ Extended Validity for Small Trusts [Finance Act, 2025] – Trusts applying under sub-clauses (i) to (v) of Section 12A(1)(ac) with total income (before exemption under Sections 11/12) not exceeding Rs. 5 crore in each of the 2 preceding years shall be granted registration for 10 years.
This extended validity applies to registrations granted on or after 01-04-2025.

♦ Ineligible for Extended Validity – The 10-year registration is not available for first-time applicants under Section 12A(1)(ac)(vi), i.e.:

➢ Trusts applying for provisional registration before commencing activities

➢ Trusts seeking direct registration after commencing activities

♦ Form for Registration of Trust under Section 12AB

Trusts or institutions seeking exemption under Sections 11 and 12 must register under Section 12AB using Form 10A or Form 10AB . These forms are filed electronically using a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC), as applicable.

♦ Form 10A :

➢ For re-registration of trusts registered under Section 12A or 12AA before 01-04-2021

➢ For provisional registration

♦ Form 10AB :

➢ For renewal of registration

➢ Conversion of provisional registration into regular registration

➢ Activation of inoperative registration

➢ Registration after modification of objects

➢ Direct regular registration post commencement of activities

These forms are also used for applications under Section 10(23C), Section 35, and Section 80G(5).

♦ Filing and Processing of Form 10A – Applications in Form 10A are processed by the Director of Income-tax (CPC), Bengaluru, who issues the order in Form 10AC and allocates a 16-digit Unique Registration Number (URN). If the application is incomplete or contains false information, registration may be cancelled after a hearing.

♦ Documents Required with Form 10A

➢ Self-certified copies of the founding instrument or documents of creation

➢ Relevant registration certificates (RoC, FCRA, prior approvals, etc.)

➢ Annual accounts (last 3 years if applicable)

➢ Nil declarations or affidavits if certain documents are not available

♦ Filing and Processing of Form 10AB – Filed for renewal or conversion to regular registration. The PCIT/CIT may issue notices for further documents or clarification. The final order is issued in Form 10AD along with the URN.

♦  Documents Required with Form 10AB

➢ Founding documents

➢ Past registration or rejection orders

➢ Annual accounts (up to 3 preceding years)

➢ Audit reports (if applicable under Section 44AB)

➢ Note on activities and modified object documents (if applicable)

♦ Conditions for Order Granting Registration – Conditions applicable to orders in Form 10AC or Form 10AD include:

➢ Income must be applied in line with the trust’s objects

➢ Business income must be incidental and separately accounted for

➢ No application of income for private religious purposes or specific religious communities

➢ Compliance with other applicable laws

➢ No non-genuine or non-compliant activities

➢ Application must contain complete and correct information

➢ Application must be filed within prescribed timelines in case of changes to objects or upon commencement of activities

♦ Mode of Filing and Verification – Forms must be submitted electronically. If return filing is by DSC, forms must also be submitted with DSC; otherwise, EVC may be used. The form must be verified by a person authorised under Section 140.

♦ Cancellation of Trust Registration under Section 12AB

The exemption under Sections 11 and 12 is available only if the trust or institution holds valid registration under Section 12AB. The Principal Commissioner or Commissioner may cancel such registration under the provisions of Section 12AB(4)/(5).

♦ Scope of Cancellation – The following registrations may be cancelled:

➢ Final or provisional registration under Section 12AB(1)(a)/(b)/(c)

➢ Final registration under Section 12AA(1)(b)

♦ Circumstances for Cancellation – Registration may be cancelled upon:

➢ Suo moto notice by PCIT/CIT on observing a specified violation

➢ Reference from the Assessing Officer

➢ Case selection under Risk Management Strategy as per Section 135A

♦ Specified Violations Include

➢ Application of income not aligned with the trust’s objects

➢ Income from non-incidental business activities

➢ Non-maintenance of separate books for incidental business

➢ Income applied for private religious purposes or a particular religious community/caste

➢ Non-genuine activities or non-compliance with registration conditions

➢ Non-compliance with applicable laws, confirmed by final order or decree

➢ Furnishing false or incorrect information in the application for registration

Note: As per the amendment by the Finance Act, 2025 (w.e.f. 01-04-2025), incomplete applications will not be treated as specified violations. However, applications containing false or incorrect information will still attract cancellation proceedings.

♦ Procedure for Cancellation

➢ PCIT/CIT may call for documents or make inquiries to verify the violation

➢ An order shall be passed in writing, either cancelling or refusing to cancel registration, after providing an opportunity of being heard

➢ Order to be forwarded to the Assessing Officer and the concerned trust/institution

♦ Timeline for Passing Cancellation Order—The cancellation order must be passed within 6 months from the end of the quarter in which the first notice is served.

♦ Consequences of Cancellation

➢ Loss of exemption under Sections 11 and 12

➢ Computation of Income under normal provisions

➢ Cancellation of approval under Section 80G

➢ Accreted income taxed under Section 115TD

♦ Accumulation of Income by Trust

A trust registered under Section 12AA or Section 12AB must apply at least 85% of its income for charitable or religious purposes in India. If not applied, the income can still be considered as applied under specific provisions, provided prescribed declarations are submitted and the funds are invested in modes specified under Section 11(5). Failure to utilise such accumulated income within permitted timelines or for approved purposes may result in withdrawal of the exemption.

♦ Modes of Accumulation

➢ Statutory Accumulation: Up to 15% of income can be accumulated indefinitely without conditions.

➢ 5-Year Accumulation [Section 11(2)]: Shortfall from the 85% application requirement can be accumulated for up to 5 years if Form 10 is filed at least two months prior to the due date of return filing under Section 139(1).

➢ Deemed Application [Section 11(1), Explanation 1(2)]: If income cannot be applied due to non-receipt or other reasons, it may be deemed to be applied if Form 9A is filed at least two months prior to the due date under Section 139(1).

Note: CBDT Circular No. 6/2023, dated 24-5-2023, clarified that the benefit of deemed application and Accumulation shall be available if Form 9A and 10 are submitted on or before the due date for filing the return under Section 139(1).

♦ Conditions for Accumulated Income – Accumulated income must:

➢ Be invested in modes specified under Section 11(5); and

➢ Be applied only for the purposes for which it was accumulated.

Use for any other purpose, or non-utilisation, results in the withdrawal of the exemption, and such income becomes taxable under Section 115BBI.

♦ Utilisation in Exceptional Cases [Section 11(3A)] – If accumulated income cannot be applied as planned due to reasons beyond control, the Assessing Officer may permit application for other aligned purposes within the trust’s objects. However, such amounts cannot be credited or paid to any other trust/institution (including those under Section 10(23C)), unless in the year of dissolution.

♦ Taxation of Accumulated Income [Section 11(3)] – Accumulated income shall be deemed to be income and taxed under Section 115BBI in the following cases:

➢ Applied for purposes other than charitable/religious;

➢ Ceases to remain invested in Section 11(5) modes;

➢ Not utilised within the permitted 5-year period;

➢ Credited or paid to any other trust or institution (registered under Section 12AA/12AB or approved under Section 10(23C)(iv)-(via)).

♦ Maintenance of Books of Account and Other Documents by Trust or Institution

A trust or institution claiming exemption under Section 11/12 or Section 10(23C) must maintain prescribed books of account and specified records, including those related to contributions, income application, donations, investments, borrowings, specified persons, and projects. These records must be preserved at the registered office for 10 years.

As per Rule 17AA , the following records must be maintained by trusts or institutions registered under Section 12AB or approved under Section 10(23C):

♦ Books of Account to be Maintained

➢ Cash book, ledger, journal

➢ Serially numbered bills and receipts issued and received

➢ Any other book necessary to provide a true and fair view of affairs

These are also required for business undertakings under Section 11(4).

♦ Records of Contributions – Trusts must maintain detailed records of all contributions, including corpus donations and funds for renovation of notified religious places. Required details:

➢ Name, address, PAN and Aadhaar (if available) of the donor

♦ Records of Income Application – Records must detail application of income in India/outside India, deemed applications, and corpus utilisation. Required information includes:

➢ Amount, recipient details, purpose of application

➢ Additional records for application out of accumulation and deemed application

♦ Records of Donations Made – Details of amounts paid to other registered/approved institutions must be maintained, along with:

➢ Name, address, and PAN of the recipient

➢ Purpose of donation

♦ Records of Investments and Deposits – Investments made from current income, accumulated funds, corpus, or specific donations must be tracked. Separate records are required for amounts invested in permissible and non-permissible modes under Section 11(5).

♦ Records of Income Accumulation – Details of the purpose and period for which income is accumulated must be recorded when 85% of the income is not applied during the year.

♦ Records of Loans and Borrowings – Details must include amount, dates, lender information, repayment status, and application of such funds in current or earlier years.

♦ Records of Properties – Separate documentation is required for:

➢ Immovable properties (type, address, acquisition cost, registration, transfer details, reinvestment of net consideration)

➢ Movable properties (type and acquisition cost)

♦ Records of Specified Persons [Section 13(3)] – To prevent exemption withdrawal, records must detail:

➢ Identity and transactions with specified persons

➢ Evidence that no undue benefit was conferred

♦ Records of Income and Projects – Must include:

➢ Income from property and other sources

➢ Name, address, and objective of each project or institution run by the trust

♦ Form and Place of Maintenance – Books may be kept in written, electronic, or digital form (including printouts or electromagnetic storage). They must be kept at the registered office or another place in India after passing a board resolution and notifying the Assessing Officer within 7 days.

♦ Retention Period – Books must be preserved for 10 years from the end of the relevant assessment year. If the assessment is reopened under Section 147, records must be retained until finalisation.

♦ Filing of Audit Reports by Trusts or Institutions in Form 10B or Form 10BB

To claim exemption under Sections 11 and 12 or Section 10(23C), trusts and institutions registered under Section 12AB or approved under Section 10(23C) must get their accounts audited if their income exceeds the basic exemption limit. The audit report must be submitted in Form 10B or Form 10BB , depending on specified conditions.

♦ Deadline to file Audit Report – The audit report must be furnished at least one month prior to the due date of filing the return of income under Section 139(1).

♦ Form 10B – When Applicable – Trusts or institutions must file Form 10B if any of the following conditions are satisfied:

➢ Total income (before claiming exemption under Sections 11, 12, or Section 10(23C)(iv), (v), (vi), (via)) exceeds Rs. 5 crore during the previous year;

➢ Foreign contribution has been received during the previous year;

➢ Any part of the income has been applied outside India.

♦ Form 10BB – When Applicable – Form 10BB must be filed where all the following conditions are met:

➢ Total income (before exemptions under Sections 11, 12, or Section 10(23C)(iv), (v), (vi), (via)) is up to Rs. 5 crore;

➢ No foreign contribution was received during the previous year;

➢ No part of the income is applied outside India.

♦ Filing of Income Tax Return by Trusts or Institutions

The trusts or institutions registered under Section 12AB are required to file a return of income under Section 139(4A) if the total income, without giving effect to the provisions of Sections 11 and 12, exceeds the maximum amount that is not chargeable to Income-tax. The return of income is to be filed within the time allowed under Section 139(1) or Section 139(4).

♦ Statutory Forms of Investment or Deposit under Section 11(5)

Section 11(5) specifies the permissible modes of investment or deposit for funds held by trusts or institutions claiming income-tax exemption under various provisions. The objective is to ensure safe and regulated deployment of unutilised income until it is applied for charitable or religious purposes.

♦ Applicability – The following entities must invest or deposit their income in the prescribed modes until utilisation:

➢ Research associations [Section 10(21)]

➢ Employee welfare funds [Section 10(23AAA)]

➢ Institutions approved under Section 10(23C)

➢ Charitable or religious trusts claiming exemption under Sections 11 and 12

♦ Funds Required to be Invested in Permissible Modes

➢ Voluntary contributions (including corpus)

➢ Corpus contributions for renovation/repair of notified religious places

➢ Accumulated income under Section 11(2)

♦ Permissible Modes of Investment or Deposit – The funds must be parked in any of the following:

➢ Immovable Property

➢ Government Savings Certificates

➢ Post Office Savings Bank Deposits

➢ Bank Accounts with Scheduled or Cooperative Banks

➢ Units of UTI or Other Mutual Funds

➢ Central/State Government Securities

➢ Debentures of any Corporate Body Guaranteed by the Central or State Government

➢ Deposits in Public Sector Companies

➢ Bonds eligible under Sections 36(1)(vii) or 36(1)(viii)

➢ Deposits with IDBI

➢ Deposits or Investments with Urban Infrastructure Finance Companies

➢ Public Account of India

➢ Authorities established for Housing or Urban Development

➢ Equity Shares of Depositories or Incubatees

➢ Certain Securities by a Recognised Stock Exchange

➢ Shares of National Skill Development Corporation

➢ Debt Instruments of RBI-registered Infrastructure Finance Companies

➢ Sovereign Gold Bonds

➢ Equity or Bonds of Approved Digital Payment Companies or ONDC Ltd.

➢ Units of POWERGRID Infrastructure Investment Trust

♦ Consequences of Non-Compliance

➢ For trusts registered under Section 12AB or approved under Section 10(23C), failure to invest or deposit income in the prescribed modes renders such income taxable under Section 115BBI.

➢ For other entities under Sections 10(21) or 10(23AAA), exemption is denied if investments are not in permissible forms.

♦ Benefit to Interested Person by a Charitable or Religious Trust

No exemption under sections 11 or 12 shall be available to a charitable or religious trust or institution to the extent its income is applied, directly or indirectly, for the benefit of any interested person.

♦ Circumstances Affecting Exemption – Section 13 provides that the exemption under sections 11 or 12 is withdrawn to the extent that income:

➢ Enures directly or indirectly for the benefit of an interested person; or

➢ Is used or applied for the benefit of such person during the previous year.

Only the amount so applied or used is denied exemption; the remaining income retains its eligibility.

♦ Definition of Interested Person [Section 13(3)] – The term includes:

➢ The author or founder of the trust/institution;

➢ A person contributing over Rs. 1 lakh in the previous year or over Rs. 10 lakh in aggregate (termed as “substantial contributor”);

➢ Where the above is a Hindu Undivided Family (HUF), its members;

➢ Any trustee, manager, or their relatives;

➢ Any concern in which the aforementioned persons (excluding substantial contributors) have a substantial interest.

♦ Meaning of Relative – Relatives include spouse, siblings (and their spouses), lineal ascendants or descendants (and their spouses), and certain other close family members.

♦ Meaning of Substantial Interest – A person is deemed to have substantial interest in a concern if, alone or with relatives:

➢ Holds at least 20% of equity share capital (in case of a company), or

➢ Is entitled to at least 20% of profits (in case of other concerns).

♦ Situations Deemed as Benefit to an Interested Person – Income or property of a trust/institution shall be deemed to be applied for the benefit of an interested person in the following cases:

➢ Loan without adequate interest or security

➢ Use of property without adequate rent

➢ Payment of unreasonable salary or allowance

➢ Provision of services without adequate remuneration

➢ Purchase of assets from interested persons for more than adequate consideration

➢ Sale of assets to interested persons for less than adequate consideration

➢ Diversion of income/property exceeding Rs. 1,000 in aggregate

➢ Investment in concerns with substantial interest of the interested person

In the last case, if the aggregate investment does not exceed 5% of the capital of the concern, the exemption is denied only on the income arising from such investment and not the entire income of the trust.

Computation of Income under Section 12AB

Income derived from property held under trust for charitable or religious purposes is exempt if applied in India for such purposes. Expenditure can be revenue or capital, but must align with the trust’s objects. Certain conditions, disallowances, and exceptions apply.

♦ Manner of Computation

• Income is computed on a commercial basis.
• Voluntary contributions (excluding corpus donations) are treated as income.
• Corpus donations are exempt only if invested in modes specified under Section 11(5).
• Anonymous donations are taxed at 30% plus applicable surcharge and cess.
• Exempt income under other provisions of Section 10 is not allowed except Sections 10(1), 10(23C), 10(23EA/EC/ED), 10(46/46A/46B), provided registration under Section 12AB is inoperative.

♦ Income from Business

• Income from a business held as property under trust is exempt under Section 11(4).
• Business incidental to objectives is exempt under Section 11(4A), provided separate books are maintained and the activity supports charitable objects.

♦ Application of Income

• Includes all expenses incurred for charitable/religious purposes, whether capital or revenue in nature.
• Application is allowed only on an actual payment basis.

♦ Specific Application Scenario

• Out of Corpus: Application not allowed unless corpus is restored within 5 years by reinvestment in Section 11(5) modes; subject to other prescribed conditions.
• Out of Loans/Borrowings: Application allowed only when repaid out of income within 5 years.
• Donations to Other Trusts: Only 85% of donations to other registered trusts are considered applications; corpus donations and donations from accumulated income are excluded.
• Capital Gains: Exempt if the entire sale consideration is reinvested in a new capital asset.
• Interest-Bearing Loans for Education: Allowed as an application if aligned with the trust’s objectives.
• International Welfare: Allowed only if the trust was created before 01-04-1952 or is notified by the CBDT.

Accumulation of Income

• 15% of income can be accumulated without restriction.
• Additional accumulation for up to 5 years permitted via Form 10 (filed at least two months prior to the due date under Section 139(1)).
• Income deemed applied (due to non-receipt or other reasons) via Form 9A is allowed if filed at least two months prior to the due date.
• CBDT Circular No. 6/2023, dated 24-5-2023, clarified that the benefit of deemed application and accumulation shall be available if Form 9A and 10 are submitted on or before the due date for filing the return under Section 139(1).
• Unutilised accumulated income beyond 5 years is taxable under Section 115BBI.

Disallowances and Invalid Applications

• Depreciation is not allowed if the cost was already claimed as an application.
• 30% disallowance on expenses without TDS deduction [Section 40(a)(ia)].
• Cash expenses exceeding Rs. 10,000 are disallowed.
• Donations forming a corpus of donee-trusts are not treated as an application.
• Application outside India is not allowed unless CBDT grants approval under Section 11(1)(c).
• Excess application in prior years cannot be carried forward.

Withdrawal of Exemption [Section 13]

Section 13 prescribes specific circumstances under which the exemption under Sections 11 and 12 shall not be available to a charitable or religious trust. These include violation of public benefit criteria, benefits to interested persons, investment in impermissible modes, and procedural defaults.

♦ Circumstances Leading to Withdrawal of Exemption

• Private Religious Purpose [Section 13(1)(a)] – Exemption is denied if the trust applies income to private religious purposes not for public benefit.
• Trust for Particular Religious Community or Caste [Section 13(1)(b)] – Charitable trusts benefiting a specific religious community or caste are not eligible. Exceptions include trusts for Scheduled Castes, Scheduled Tribes, backward classes, women, or children, and trusts created before 01-04-1962.
• Benefit to Interested Persons [Section 13(1)(c)] – Income applied for the benefit of specified persons leads to denial of exemption to that extent. Additional consequences include:

➢ Tax under Section 115BBI

➢ Penalty under Section 271AAE

➢ Taxability in the hands of beneficiary under Section 56(2)(x)

• Investment in Impermissible Modes [Section 13(1)(d)] – Exemption is denied to the extent funds are invested in non-specified modes. Exceptions include assets held prior to 01-06-1973, bonus shares, business profits with separate books, and assets converted into permissible modes within one year.
• Anonymous Donations [Section 13(7)] – Taxable portion of anonymous donations under Section 115BBC is not eligible for exemption. The non-taxable portion must satisfy the 85% application requirement.
• Violation of Proviso to Section 2(15) [Section 13(8)] – Where a trust advances an object of general public utility but crosses the 20% threshold of receipts from commercial activities, exemption is denied. Computation of income in such cases allows deduction of revenue expenditure incurred in India, subject to specific exclusions.
• Non-filing of Form 10 or Income-tax Return [Section 13(9)] – Failure to submit Form 10 and Income-tax return within the due date under Section 139(1) leads to denial of exemption for accumulated income under Section 11(2). However, no penal consequence arises if both are filed by the due date.
• Non-fulfilment of Conditions under Section 12A – Exemption under Sections 11 and 12 is denied if:

➢ Audit report is not obtained

➢ Books are not properly maintained

➢ Return is not filed within the prescribed time

• Computation of Taxable Income upon Withdrawal of Exemption
  • Permitted deductions – Revenue expenditure incurred in India for trust objects (with exclusions)
  • Non-permissible deductions:

➢ Capital expenditure

➢ Expenses in default of TDS [Section 40(a)(ia)]

➢ Cash payments [Sections 40A(3)/40A(3A)]

➢ Expenditure incurred outside India

• • Losses from disallowed expenses are not eligible for set-off under any provision.

Exclusivity of Section 11 and Section 10(23C)

Trusts cannot simultaneously claim exemption under Sections 12AB and 10(23C). They must opt for one at the time of seeking approval.

Anonymous Donations [Section 115BBC]

Anonymous donations are not eligible for exemption under Section 11, Section 12, or Section 10(23C). If the donee does not maintain records identifying the donor, the donation is taxed at 30% (plus applicable surcharge and cess).

♦ Meaning of Anonymous Donation

An anonymous donation is a voluntary contribution in which the recipient does not maintain records of the donor’s identity, including name, address, and other prescribed particulars.

♦ Threshold for Taxability

Anonymous donations are taxable only if the total exceeds the higher of:

• Rs. 1,00,000; or
• 5% of the total donations received.

Tax is levied only on the excess over the higher of these limits.

♦ Rate of Tax

Tax is levied at 30% (plus surcharge and cess) on the taxable portion of anonymous donations.

♦ Entities Liable for Tax on Anonymous Donations

The following entities are liable to pay tax under this provision:

• Trusts or institutions referred to in Section 11
• Educational institutions under Section 10(23C)(iiiad) and (vi) (not substantially financed by the Government)
• Medical institutions under Section 10(23C)(iiiae) and (via) (not substantially financed by the Government)
• Funds/institutions for charitable purposes notified under Section 10(23C)(iv)
• Religious and charitable trusts notified under Section 10(23C)(v)

♦ Exempt Entities

Anonymous donations received by the following entities are not taxable under this provision:

• Trusts or institutions established wholly for religious purposes
• Trusts or institutions established wholly for religious and charitable purposes, except where anonymous donations are received with a specific direction for any educational or medical institution run by such trust.

Merger of Trusts [Section 12AC]

Section 12AC provides for the merger of charitable trusts or institutions without incurring tax on accreted income, subject to specified conditions. This provision complements Section 115TD, which exempts accreted tax in case of mergers between registered or approved entities with similar objectives.

Section 12AC applies where:

• Both entities are registered under Section 12AAor Section 12AB, or approved under Section 10(23C)(iv), (v), (vi), or (via);
• Both entities have the same or similar charitable objectives; and
• Other prescribed conditions are fulfilled.

A merger that satisfies these requirements is exempt from accreted tax under Section 115TD.

Tax on Accreted Income [Section 115TD]

Specified trusts or institutions are liable to pay additional income-tax on accreted income when they convert into non-charitable entities, merge with ineligible entities, or fail to transfer assets upon dissolution. This tax, levied under Section 115TD, is in addition to regular income-tax and is charged at the maximum marginal rate.

♦ Applicability of Accreted Tax

These provisions apply to:

• Institutions approved under Section 10(23C);
• Trusts registered under Section 12Aor 12AB.

♦ Triggering Events for Accreted Tax

Accreted tax is levied when:

• The trust/institution is converted into a non-eligible form;
• It merges with an entity not having similar objects or lacking registration/approval;
• Upon dissolution, it fails to transfer assets to another registered or approved institution within 12 months.

♦ Deemed Conversion

Deemed conversion arises when:

• Registration or approval is cancelled;
• Objects are modified, and the entity fails to obtain fresh registration/approval;
• No application is made for re-registration, renewal, or conversion of provisional registration within the prescribed timelines.

Computation of Accreted Income

Accreted income = Aggregate Fair Market Value (FMV) of assets – Total liabilities

FMV is calculated as per Rule 17CB, ignoring:

• Prepaid taxes (net of refunds claimed);
• Non-representative assets (e.g., deferred expenditure);
• Assets acquired from agricultural income;
• Assets acquired before the effective date of registration if no exemption was availed under Sections 11, 12 , or 10(23C);
• Assets transferred to another registered institution.

Liabilities exclude capital/reserve funds, contingent liabilities, and tax provisions.

♦ Tax Rate and Additional Conditions

• Tax is levied at the maximum marginal rate.
• No deduction or credit is allowed against this tax.
• Payable even if the entity has no other taxable income.

♦ Time Limit for Tax Payment

Tax must be paid within 14 days from:

• Expiry of the appeal period or receipt of cancellation order;
• End of the previous year in case of modification without re-registration;
• End of the previous year, where no application is made for re-registration;
• Date of merger or expiry of 12-month period from dissolution.

♦ Interest on Late Payment [Section 115TE]

Interest at 1% per month or part thereof is levied for delay in payment from the due date till the date of actual payment.

♦ Assessee in Default [Section 115TF]

The following shall be deemed assessee in default:

• The specified trust or institution, including trustees or principal officer;
• Any non-charitable entity receiving assets upon dissolution (limited to asset value received).

Tax on Specified Income [Section 115BBI]

Section 115BBI of the Income-tax Act, 1961 prescribes a special tax rate for specified income of certain charitable and religious institutions. It mandates taxation at a flat rate of 30% plus applicable surcharge and cess on such income, irrespective of the general exemption provisions under Sections 10(23C) and 11.

♦ Applicability of Section 115BBI

The provision applies to the following entities:

• Funds or institutions under Section 10(23C)(iv) and (v);
• Universities or educational institutions under Section 10(23C)(vi);
• Hospitals or medical institutions under Section 10(23C)(via); and
• Trusts or institutions registered under Section 11.

Specified Income Taxable under Section 115BBI

The following incomes shall be taxed at the special rate:

• Income accumulated in excess of the 15% limit, which is not permitted under any specific provisions;
• Deemed income under Section 11(1B) not applied within the specified time;
• Income applied or ceased to be accumulated for non-charitable/religious purposes;
• Income applied for purposes not aligned with approved objects under Section 10(23C);
• Income ceasing to remain invested in forms specified under Section 11(5);
• Income not utilised within the 5-year accumulation period;
• Income credited or paid to another trust/institution registered or approved under Sections 12AA/12AB or 10(23C);
• Non-exempt income due to impermissible investments under Section 11(5);
• Income used for the benefit of interested persons, thereby losing exemption under Sections 10(23C) or 11/12;
• Income applied for charitable purposes outside India, thereby losing the exemption.

♦ Computation of Specified Income

In computing the specified income:

• No deduction shall be allowed for any expenditure, allowance, or loss under any provision of the Act.
• This restriction applies only to the computation of specified income; it does not affect other income.

♦ Tax Rate

• Specified income is taxed at 30% plus applicable surcharge and cess.
• Other income is taxed at rates applicable to the entity based on its nature and classification.

Approval of a Fund or Institution under Section 80G

Introduction

Section 80G provides a deduction to donors for contributions made to certain approved funds or institutions. The deduction is allowed only if the donee institution is approved by the Principal Commissioner or Commissioner and fulfils specific conditions, including filing statements and issuing donation certificates.

Conditions for Approval under Section 80G

To obtain or maintain approval, a fund or institution must:

• Be established in India for charitable purposes (excluding primarily religious purposes).
• Not be intended for the benefit of any particular religious community or caste, with specified exceptions (e.g., Scheduled Castes, women and children).
• Have income exempt under Sections 11, 12, 10(23AA), or 10(23C). Business income is permitted if separate accounts are maintained and donations are not used for such business.
• Apply income and assets only for charitable purposes.
• Maintain regular books of account.
• Be constituted or registered under applicable laws (e.g., trust, society, Section 8company, university).
• Be approved by the income tax authority.
• File donation statement in Form 10BD and issue donation certificates in Form 10BE.

Statement of Donation ( Form 10BD )

• Furnished electronically (via DSC or EVC) by 31st May of the following financial year.
• Verified by an authorized person.
• Correction statements may be filed.
• Failure to file attracts a fee under Section 234Gand a penalty under Section 271K.

Certificate of Donation (Form 10BE)

• Issued to each donor by 31st May of the following financial year.
• Specifies donation amount for the year.
• Failure to issue the certificate also attracts a fee under Section 234Gand a penalty under Section 271K.

Application for Approval

• Applications for approval or re-approval must be filed in Form 10A or Form 10AB , depending on the nature of the applicant and timing.

Time limits vary, including:

• Re-approval of Existing Approval: By 30-06-2024 for institutions already approved as of 01-04-2021 (Circular No. 7/2024).
• Renewal of Approval: At least 6 months before expiry for re-approval.
• Conversion of Provisional Approval to Regular Approval: Within 6 months of the commencement of activities or 6 months before the expiry of the provisional approval.
• Provisional Approval: At least 1 month before the start of the relevant previous year for new applicants seeking provisional approval. For entities that have not commenced their activities.
• Direct Regular Approval: At any time after the commencement of activities for direct regular approval, where activities have commenced.

Order for Approval

• Approval is generally granted for 5 years.
• Provisional approvals are valid for 3 years.
• Orders must be passed within prescribed timelines (e.g., 6 months from the end of the relevant quarter in which the application is received). In case of provisional approval, the order shall be passed within 1 month from the end of the month in which the application was received.

Inquiry and Rejection

The Principal Commissioner or Commissioner may call for documents and conduct inquiries. If not satisfied with the genuineness of activities or compliance with conditions, approval may be rejected after providing a reasonable opportunity of being heard.

Form for Approval of Trust or Institution under Section 80G

To claim a deduction under Section 80G, donors must contribute to a fund or institution approved by the Principal Commissioner or Commissioner. Approval is granted through Form 10A (provisional approval) or Form 10AB (conversion, renewal, or direct approval), which must be filed electronically with the prescribed authorities.

♦ Applicability of Forms

• Form 10A is used for:

➢ Re-approval of existing institutions approved before 01-04-2021.

➢ Provisional approval for new institutions (only if activities haven’t commenced).

• Form 10AB is used for:

➢ Renewal of approval for institutions under the new regime.

➢ Conversion of provisional approval into regular approval.

➢ Direct approval post commencement of activities.

• Filing Authority and Procedure
  • The prescribed authority authorised by the CBDT is the Principal Commissioner or Commissioner.
  • On receipt of Form 10A , approval is granted in Form 10AC with a 16-digit Unique Registration Number (URN).
  • Incorrect or false information in Form 10A may lead to cancellation of approval after due opportunity of being heard.
  • On receipt of Form 10AB , approval is granted in Form 10AD with a 16-digit Unique Registration Number (URN).

Documents to be Furnished

• For Form 10A :

➢ Self-certified copy of the instrument or document of creation or establishment.

➢ Self-certified copy of registration certificates with relevant authorities.

➢ Self-certified copy of the order of earlier registration, if any. (for re-approval)

➢ Self-certified copies of annual accounts (up to 3 years immediately preceding the year in which the said application is made), if applicable.

➢ Self-certified affidavit (if no prior approval).

➢ Self-certified copy of the rejection order of the application for grant of registration under Section 80G, if any (for provisional approval)

• For Form 10AB : All documents listed above, plus:

➢ Audit reports and accounts of the business undertaking (for trusts with business income).

➢ Self-certified copy of the documents evidencing adoption or modification of the objects.

➢ Notes on activities and objects.

Conditions for Re-approval Cases- Re-approval orders (Form 10AC or 10AD ) are passed subject to conditions such as:

• • No cancellation order under Sections 12AB(4), under the fifteenth proviso to 10(23C), or as per Rule 2C or Rule 17A.
  • Timely and complete (true and correct) filing of application.
  • Where the institution is approved and the approval period is due to expire, such institution has applied for approval at least 6 months before the expiry.

Conditions for provisional approval – Order forProvisional approval ( Form 10AC or 10AD ) are passed subject to conditions such as:

• • No cancellation order under Sections 12AB(4), under the fifteenth proviso to 10(23C), or as per Rule 2C or Rule 17A.
  • Timely and complete (true and correct) filing of application.
  • Institutions with provisional approval must apply for regular approval within 6 months of activity commencement or 6 months before expiry, whichever is earlier.

♦ Verification and Filing Mode

• Applications must be filed electronically with a Digital Signature Certificate (DSC) or through an Electronic Verification Code (EVC), as applicable.
• The person authorised under Section 140 of the Income Tax Act must verify the application.

Income-tax Act, 1961

Section – 2

Definitions.

2. In this Act, unless the context otherwise requires,—

(1) “advance tax” means the advance tax payable in accordance with the provisions of Chapter XVII-C;

(1A) “agricultural income” means—

(a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;

(b) any income derived from such land by—

(i) agriculture; or

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause;

(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :

Provided that—

(i) the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and

(ii) the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated—

(A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand; or

(B) in any area within the distance, measured aerially,—

(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or

(II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than one lakh but not exceeding ten lakh; or

(III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh.

Explanation 1.—For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section. Explanation 2.—For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under sub-clause (a) or sub-clause (b) shall not be agricultural income.

Explanation 3.—For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.

Explanation 4.—For the purposes of clause (ii) of the proviso to sub-clause (c), “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

(1B) “amalgamation”, in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that—

(i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation;

(ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation;

(iii) shareholders holding not less than three-fourths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation,

otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first-mentioned company;

(1C) “Additional Commissioner” means a person appointed to be an Additional Commissioner of Income-tax under sub-section (1) of section 117;

(1D) “Additional Director” means a person appointed to be an Additional Director of Income-tax under sub-section (1) of section 117;

(2) “annual value”, in relation to any property, means its annual value as determined under section 23;

(3) [***]

(4) “Appellate Tribunal” means the Appellate Tribunal constituted under section 252 ;

(5) “approved gratuity fund” means a gratuity fund which has been and continues to be approved by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part C of the Fourth Schedule ;

(6) “approved superannuation fund” means a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part B of the Fourth Schedule ;

(7) “assessee” means a person by whom any tax or any other sum of money is payable under this Act, and includes—

(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person ;

(b) every person who is deemed to be an assessee under any provision of this Act ;

(c) every person who is deemed to be an assessee in default under any provision of this Act ;

(7A) “Assessing Officer” means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;

(8) “assessment” includes reassessment ;

(9) “assessment year” means the period of twelve months commencing on the 1st day of April every year ;

(9A) “Assistant Commissioner” means a person appointed to be an Assistant Commissioner of Income-tax or a Deputy Commissioner of Income-tax under sub-section (1) of section 117 ;

(9B) “Assistant Director” means a person appointed to be an Assistant Director of Income-tax under sub-section (1) of section 117 ;

(10) “average rate of income-tax” means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income ;

(11) “block of assets” means a group of assets falling within a class of assets comprising—

(12) tangible assets, being buildings, machinery, plant or furniture ;

(12A) intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, not being goodwill of a business or profession, in respect of which the same percentage of depreciation is prescribed ;

(12) “Board” means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) ;

(12A) “books or books of account” includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or in electronic form or in digital form or as print-outs of data stored in such electronic form or in digital form or in a floppy, disc, tape or any other form of electro­magnetic data storage device;

(13) “business” includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;

(13A) “business trust” means a trust registered as,—

(i) an Infrastructure Investment Trust under the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or

(ii) a Real Estate Investment Trust under the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992),

(14) “capital asset” means—

(a) property of any kind held by an assessee, whether or not connected with his business or profession;

(b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);

Following sub-clause (b) shall be substituted for existing sub-clause (b) of clause (14) of section 2 by the Finance Act, 2025, w.e.f. 1-4-2026:

(b) any securities held by—

(i) a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or

(ii) an investment fund specified in clause (a) of Explanation 1 to section 115UB which has invested such securities in accordance with the provisions of the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or under the International Financial Services Centres Authority Act, 2019 (50 of 2019);

(c) any unit linked insurance policy to which exemption under clause (10D) of section 10 does not apply [on account of the applicability of the fourth and fifth provisos thereof], but does not include—

(i) any stock-in-trade [other than the securities referred to in sub-clause (b)], consumable stores or raw materials held for the purposes of his business or profession ;

(ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes—

(a) jewellery;

(b) archaeological collections;

(c) drawings;

(d) paintings;

(e) sculptures; or

(f) any work of art.

Explanation.—For the purposes of this sub-clause, “jewellery” includes—

(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;

(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;

(iii) agricultural land in India, not being land situate—

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or

(b) in any area within the distance, measured aerially,—

(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or

(II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or

(III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.

Explanation.—For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

(iv) 6¹/₂ per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government;

(v) Special Bearer Bonds, 1991, issued by the Central Government ;

(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015 notified by the Central Government.

Explanation 1.—For the removal of doubts, it is hereby clarified that “property” includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.

Explanation 2.—For the purposes of this clause—

(a) the expression “Foreign Institutional Investor” shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD;

(b) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(15) “charitable purpose” includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless—

(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

(ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;

(15A) “Chief Commissioner” means a person appointed to be a Chief Commissioner of Income-tax or a Director General of Income-tax or a Principal Chief Commissioner of Income-tax or a Principal Director General of Income-tax under sub-section (1) of section 117;

(15B) “child”, in relation to an individual, includes a step-child and an adopted child of that individual;

(16) “Commissioner” means a person appointed to be a Commissioner of Income-tax or a Director of Income-tax or a Principal Commissioner of Income-tax or a Principal Director of Income-tax under sub-section (1) of section 117;

(16A) “Commissioner (Appeals)” means a person appointed to be a Commissioner of Income-tax (Appeals) under sub-section (1) of section 117 ;

(17) “company” means—

(i) any Indian company, or

(ii) any body corporate incorporated by or under the laws of a country outside India, or

(iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922) or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or

(iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company :

Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971 or on or after that date) as may be specified in the declaration ;

(18) “company in which the public are substantially interested”—a company is said to be a company in which the public are substantially interested—

(a) if it is a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank ; or

(aa) if it is a company which is registered under section 25 of the Companies Act, 1956 (1 of 1956) ; or

(ab) if it is a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, it is declared by order of the Board to be a company in which the public are substantially interested :

Provided that such company shall be deemed to be a company in which the public are substantially interested only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration ; or

(ac) if it is a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit Society ; or

(ad) if it is a company, wherein shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies ;

(b) if it is a company which is not a private company as defined in the Companies Act, 1956 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely :—

(A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder ;

(B) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by—

(a) the Government, or

(b) a corporation established by a Central, State or Provincial Act, or

(c) any company to which this clause applies or any subsidiary company of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year.

Explanation.—In its application to an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, item (B) shall have effect as if for the words “not less than fifty per cent”, the words “not less than forty per cent” had been substituted ;

(19) “co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies ;

(19A) “Deputy Commissioner” means a person appointed to be a Deputy Commissioner of Income-tax under sub-section (1) of section 117 ;

(19AA) “demerger”, in relation to companies, means the transfer, pursuant to a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 (1 of 1956), by a demerged company of its one or more undertakings to any resulting company in such a manner that—

(i) all the property of the undertaking, being transferred by the demerged company, immediately before the demerger, becomes the property of the resulting company by virtue of the demerger;

(ii) all the liabilities relatable to the undertaking, being transferred by the demerged company, immediately before the demerger, become the liabilities of the resulting company by virtue of the demerger;

(iii) the property and the liabilities of the undertaking or undertakings being transferred by the demerged company are transferred at values appearing in its books of account immediately before the demerger:

Provided that the provisions of this sub-clause shall not apply where the resulting company records the value of the property and the liabilities of the undertaking or undertakings at a value different from the value appearing in the books of account of the demerged company, immediately before the demerger, in compliance to the Indian Accounting Standards specified in Annexure to the Companies (Indian Accounting Standards) Rules, 2015;

(iv) the resulting company issues, in consideration of the demerger, its shares to the shareholders of the demerged company on a proportionate basis except where the resulting company itself is a shareholder of the demerged company;

(v) the shareholders holding not less than three-fourths in value of the shares in the demerged company (other than shares already held therein immediately before the demerger, or by a nominee for, the resulting company or, its subsidiary) become share-holders of the resulting company or companies by virtue of the demerger, otherwise than as a result of the acquisition of the property or assets of the demerged company or any undertaking thereof by the resulting company;

(vi) the transfer of the undertaking is on a going concern basis;

(vii) the demerger is in accordance with the conditions, if any, notified under sub-section (5) of section 72A by the Central Government in this behalf.

Explanation 1.—For the purposes of this clause, “undertaking” shall include any part of an undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity.

Explanation 2.—For the purposes of this clause, the liabilities referred to in sub-clause (ii), shall include—

(a) the liabilities which arise out of the activities or operations of the undertaking;

(b) the specific loans or borrowings (including debentures) raised, incurred and utilised solely for the activities or operations of the undertaking; and

(c) in cases, other than those referred to in clause (a) or clause (b), so much of the amounts of general or multipurpose borrowings, if any, of the demerged company as stand in the same proportion which the value of the assets transferred in a demerger bears to the total value of the assets of such demerged company immediately before the demerger.

Explanation 3.—For determining the value of the property referred to in sub-clause (iii), any change in the value of assets consequent to their revaluation shall be ignored.

Explanation 4.—For the purposes of this clause, the splitting up or the reconstruction of any authority or a body constituted or established under a Central, State or Provincial Act, or a local authority or a public sector company, into separate authorities or bodies or local authorities or companies, as the case may be, shall be deemed to be a demerger if such split up or reconstruction fulfils such conditions as may be notified in the Official Gazette, by the Central Government.

Explanation 5.—For the purposes of this clause, the reconstruction or splitting up of a company, which ceased to be a public sector company as a result of transfer of its shares by the Central Government, into separate companies, shall be deemed to be a demerger, if such reconstruction or splitting up has been made to give effect to any condition attached to the said transfer of shares and also fulfils such other conditions as may be notified by the Central Government in the Official Gazette.

Explanation 6.—For the purposes of this clause, the reconstruction or splitting up of a public sector company into separate companies shall be deemed to be a demerger, if such reconstruction or splitting up has been made to transfer any asset of the demerged company to the resulting company and the resulting company—

(i) is a public sector company on the appointed day indicated in such scheme, as may be approved by the Central Government or any other body authorised under the provisions of the Companies Act, 2013 (18 of 2013) or any other law for the time being in force governing such public sector companies in this behalf; and

(ii) fulfils such other conditions as may be notified by the Central Government in the Official Gazette in this behalf; (19AAA) “demerged company” means the company whose undertaking is transferred, pursuant to a demerger, to a resulting company;

(19B) “Deputy Commissioner (Appeals)” means a person appointed to be a Deputy Commissioner of Income-tax (Appeals) [***] under sub-section (1) of section 117 ;

(19C) “Deputy Director” means a person appointed to be a Deputy Director of Income-tax under sub-section (1) of section 117 ;

(20) “director”, “manager” and “managing agent”, in relation to a company, have the meanings respectively assigned to them in the Companies Act, 1956 (1 of 1956) ;

(21) “Director General or Director” means a person appointed to be a Director General of Income-tax or a Principal Director General of Income-tax or, as the case may be, a Director of Income-tax or a Principal Director of Income-tax, under sub-section (1) of section 117, and includes a person appointed under that sub-section to be an Additional Director of Income-tax or a Joint Director of Income-tax or an Assistant Director or Deputy Director of Income-tax;

(22) “dividend” includes—

(a) any distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company ;

(b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits, whether capitalised or not ;

(c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not ;

(d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not ;

(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits;

²[(f) any payment by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 68 of the Companies Act, 2013 (18 of 2013);]  but “dividend” does not include—

(i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ;

(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, and before the 1st day of April, 1965;

(ii) any advance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ;

[(iia) any advance or loan between two group entities, where,—

(A) one of the group entity is a “Finance company” or a “Finance unit”; and

(B) the parent entity or principal entity of such group is listed on stock exchange in a country or territory outside India other than the country or territory outside India as may be specified by the Board in this behalf;]

(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off;

(iv) [***]

(v) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company).

Explanation 1.—The expression “accumulated profits”, wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956.

Explanation 2.—The expression “accumulated profits” in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place.

Explanation 2A.—In the case of an amalgamated company, the accumulated profits, whether capitalised or not, or loss, as the case may be, shall be increased by the accumulated profits, whether capitalised or not, of the amalgamating company on the date of amalgamation.

Explanation 3.—For the purposes of this clause,—

(a) “concern” means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company ;

(b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern ;

⁵[(c) “Finance Company” and “Finance Unit” shall have the same meaning as assigned respectively to them in clauses (e) and (f) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Finance Company) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019):

Provided that such Finance Company or Finance Unit, is set up as a global or regional corporate treasury centre for undertaking treasury activities or treasury services as per the relevant regulations made by the International Financial Services Centres Authority established under section 4 of the said Act;

(d) “group entity”, “parent entity” and “principal entity” shall be such entities which satisfy such conditions as prescribed in this behalf;]

(22A) “domestic company” means an Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income ;

(22AA) “document” includes an electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(22AAA) “electoral trust” means a trust so approved by the Board in accordance with the scheme made in this regard by the Central Government;

(22B) “fair market value”, in relation to a capital asset, means—

(i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date ; and

(ii) where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act ;

(23) (i) “firm” shall have the meaning assigned to it in the Indian Partnership Act, 1932 (9 of 1932), and shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008 (6 of 2009);

(ii) “partner” shall have the meaning assigned to it in the Indian Partnership Act, 1932 (9 of 1932), and shall include,—

(a) any person who, being a minor, has been admitted to the benefits of partnership; and

(b) a partner of a limited liability partnership as defined in the Limited Liability Partnership Act, 2008 (6 of 2009);

(iii) “partnership” shall have the meaning assigned to it in the Indian Partnership Act, 1932 (9 of 1932), and shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008 (6 of 2009);

(23A) “foreign company” means a company which is not a domestic company;

(23B) “fringe benefits” means any fringe benefits referred to in section 115WB;

(23C) “hearing” includes communication of data and documents through electronic mode;

(24) “income” includes—

(i) profits and gains ;

(ii) dividend ;

(iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via) of clause (23C) of section 10 or by an electoral trust.

Explanation.—For the purposes of this sub-clause, “trust” includes any other legal obligation ;

(iii) the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17 ;

(iiia) any special allowance or benefit, other than perquisite included under sub-clause (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit ;

(iiib) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living ;

(iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ;

(iva) the value of any benefit or perquisite, whether convertible into money or not, obtained by any representative assessee mentioned in clause (iii) or clause (iv) of sub-section (1) of section 160 or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such person being hereafter in this sub-clause referred to as the “beneficiary”) and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary ;

(v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59 ;

(va) any sum chargeable to income-tax under clause (iiia) of section 28;

(vb) any sum chargeable to income-tax under clause (iiib) of section 28;

(vc) any sum chargeable to income-tax under clause (iiic) of section 28;

(vd) the value of any benefit or perquisite taxable under clause (iv) of section 28 ;

(ve) any sum chargeable to income-tax under clause (v) of section 28;

(vi) any capital gains chargeable under section 45 ;

(vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule ;

(viia) the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members;

(viii) [Omitted by the Finance Act, 1988, w.e.f. 1-4-1988. Original sub-clause (viii) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964;]

(ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.

Explanation.—For the purposes of this sub-clause,—

(i) “lottery” includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called;

(ii) “card game and other game of any sort” includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game ;

(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees’ State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ;

(xi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.

Explanation.—For the purposes of this clause, the expression “Keyman insurance policy” shall have the meaning assigned to it in the Explanation to clause (10D) of section 10 ;

(xii) any sum referred to in clause (va) of section 28;

(xiia) the fair market value of inventory referred to in clause (via) of section 28;

(xiii) any sum referred to in clause (v) of sub-section (2) of section 56;

(xiv) any sum referred to in clause (vi) of sub-section (2) of section 56;

(xv) any sum of money or value of property referred to in clause (vii) or clause (viia) of sub-section (2) of section 56;

(xvi) any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of sub-section (2) of section 56;

(xvii) any sum of money referred to in clause (ix) of sub-section (2) of section 56;

(xviia) any sum of money or value of property referred to in clause (x) of sub-section (2) of section 56;

(xviib) any compensation or other payment referred to in clause (xi) of sub-section (2) of section 56;

⁶[(xviic) any sum referred to in clause (xii) of sub-section (2) of section 56;

(xviid) any sum referred to in clause (xiii) of sub-section (2) of section 56;]

(xviii) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee other than,—

(a) the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43; or

(b) the subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be;

(25) “Income-tax Officer” means a person appointed to be an Income-tax Officer under section 117 ;

(25A) “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters;

(26) “Indian company” means a company formed and registered under the Companies Act, 1956 (1 of 1956), and includes—

(i) a company formed and registered under any law relating to companies formerly in force in any part of India (other than the State of Jammu and Kashmir and the Union territories specified in sub-clause (iii) of this clause) ;

(ia) a corporation established by or under a Central, State or Provincial Act ;

(ib) any institution, association or body which is declared by the Board to be a company under clause (17) ;

(ii) in the case of the State of Jammu and Kashmir, a company formed and registered under any law for the time being in force in that State ;

(iii) in the case of any of the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry, a company formed and registered under any law for the time being in force in that Union territory :

Provided that the registered or, as the case may be, principal office of the company, corporation, institution, association or body in all cases is in India ;

(26A) “infrastructure capital company” means such company which makes investments by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or sub-section (1) of section 80-IAB or an undertaking developing and building a housing project referred to in sub-section (10) of section 80-IB or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;

(26B) “infrastructure capital fund” means such fund operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908) established to raise monies by the trustees for investment by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or sub-section (1) of section 80-IAB or an undertaking developing and building a housing project referred to in sub-section (10) of section 80-IB or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;

(27) [***]

(28) “Inspector of Income-tax” means a person appointed to be an Inspector of Income-tax under sub-section (1) of section 117 ;

(28A) “interest” means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised ;

(28B) “interest on securities” means,—

(i) interest on any security of the Central Government or a State Government ;

(ii) interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provincial Act ;

(28BB) “insurer” means an insurer, being an Indian insurance company, as defined under clause (7A) of section 2 of the Insurance Act, 1938 (4 of 1938), which has been granted a certificate of registration under section 3 of that Act;

(28C) “Joint Commissioner” means a person appointed to be a Joint Commissioner of Income-tax or an Additional Commissioner of Income-tax under sub­section (1) of section 117;

⁷[(28CA) “Joint Commissioner (Appeals)” means a person appointed to be a Joint Commissioner of Income-tax (Appeals) or an Additional Commissioner of Income-tax (Appeals) under sub-section (1) of section 117;]

(28D) “Joint Director” means a person appointed to be a Joint Director of Income-tax or an Additional Director of Income-tax under sub-section (1) of section 117;

(29) “legal representative” has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908 (5 of 1908) ;

(29A) “liable to tax”, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of that country; (29AA) “long-term capital asset” means a capital asset which is not a short-term capital asset ;

(29B) “long-term capital gain” means capital gain arising from the transfer of a long-term capital asset ;

(29BA) “manufacture”, with its grammatical variations, means a change in a non-living physical object or article or thing,—

(a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or

(b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure;

(29C) “maximum marginal rate” means the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of income in the case of an individual , association of persons or, as the case may be, body of individuals as specified in the Finance Act of the relevant year;

(29D) “National Tax Tribunal” means the National Tax Tribunal established under section 3 of the National Tax Tribunal Act, 2005;

(30) “non-resident” means a person who is not a “resident”, and for the purposes of sections 92, 93 and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of section 6;

(31) “person” includes—

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.

Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains;

(32) “person who has a substantial interest in the company”, in relation to a company, means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty per cent of the voting power ;

(33) “prescribed” means prescribed by rules made under this Act ;

(34) “previous year” means the previous year as defined in section 3 ;

(34A) “Principal Chief Commissioner of Income-tax” means a person appointed to be a Principal Chief Commissioner of Income-tax under sub-section (1) of section 117;

(34B) “Principal Commissioner of Income-tax” means a person appointed to be a Principal Commissioner of Income-tax under sub-section (1) of section 117;

(34C) “Principal Director of Income-tax” means a person appointed to be a Principal Director of Income-tax under sub-section (1) of section 117;

(34D) “Principal Director General of Income-tax” means a person appointed to be a Principal Director General of Income-tax under sub-section (1) of section 117;

(35) “principal officer”, used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—

(a) the secretary, treasurer, manager or agent of the authority, company, association or body, or

(b) any person connected with the management or administration of the local authority, company, association or body upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer thereof ;

(36) “profession” includes vocation ;

(36A) “public sector company” means any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ;

(37) “public servant” has the same meaning as in section 21 of the Indian Penal Code (45 of 1860) ;

(37A) “rate or rates in force” or “rates in force”, in relation to an assessment year or financial year, means—

(i) for the purposes of calculating income-tax under the first proviso to sub-section (5) of section 132, or computing the income-tax chargeable under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 or deducting income-tax under section 192 from income chargeable under the head “Salaries” or computation of the “advance tax” payable under Chapter XVII-C in a case not falling under section 115A or section 115B or section 115BB or section 115BBB or section 115E or section 164 or section 164A or section 167B, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, and for the purposes of computation of the “advance tax” payable under Chapter XVII-C in a case falling under section 115A or section 115B or section 115BB or section 115BBB or section 115E or section 164 or section 164A or section 167B, the rate or rates specified in section 115A or section 115B or section 115BB or section 115BBB or section 115E or section 164 or section 164A or section 167B, as the case may be, or the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, whichever is applicable ;

(ii) for the purposes of deduction of tax under sections 193, 194, 194A , 194B [, 194BA] , 194BB and 194D, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year ;

(iii) for the purposes of deduction of tax under section 194LBA or section 194LBB or section 194LBC or section 195, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in an agreement entered into by the Central Government under section 90, or an agreement notified by the Central Government under section 90A, whichever is applicable by virtue of the provisions of section 90, or section 90A, as the case may be;

(38) “recognised provident fund” means a provident fund which has been and continues to be recognised by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees’ Provident Funds Act, 1952 (19 of 1952) ;

(39) [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993;]

(40) “regular assessment” means the assessment made under sub-section (3) of section 143 or section 144 ;

(41) “relative”, in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual ;

(41A) “resulting company” means one or more companies (including a wholly owned subsidiary thereof) to which the undertaking of the demerged company is transferred in a demerger and, the resulting company in consideration of such transfer of undertaking, issues shares to the shareholders of the demerged company and includes any authority or body or local authority or public sector company or a company established, constituted or formed as a result of demerger;

(42) “resident” means a person who is resident in India within the meaning of section 6 ;

(42A) “short-term capital asset” means a capital asset held by an assessee for not more than [twenty-four] months immediately preceding the date of its transfer :

Provided that in the case of a security [***] listed in a recognized stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of an equity oriented fund or a zero coupon bond, the provisions of this clause shall have effect as if for the words “[twenty-four] months”, the words “twelve months” had been substituted:

Provided further that in case of a share of a company (not being a share listed in a recognised stock exchange) or a unit of a Mutual Fund specified under clause (23D) of section 10, which is transferred during the period beginning on the 1st day of April, 2014 and ending on the 10th day of July, 2014, the provisions of this clause shall have effect as if for the words “thirty-six months”, the words “twelve months” had been substituted [as it stood immediately prior to the commencement of the Finance (No. 2) Act, 2024].

^12a[***]

Explanation 1.—(i) In determining the period for which any capital asset is held by the assessee—

(a) in the case of a share held in a company in liquidation, there shall be excluded the period subsequent to the date on which the company goes into liquidation ;

(b) in the case of a capital asset which becomes the property of the assessee in the circumstances mentioned in sub-section (1) of section 49, there shall be included the period for which the asset was held by the previous owner referred to in the said section ;

(ba) in the case of a capital asset referred to in clause (via) of section 28, the period shall be reckoned from the date of its conversion or treatment;

(c) in the case of a capital asset being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, there shall be included the period for which the share or shares in the amalgamating company were held by the assessee ;

(d) in the case of a capital asset, being a share or any other security (hereafter in this clause referred to as the financial asset) subscribed to by the assessee on the basis of his right to subscribe to such financial asset or subscribed to by the person in whose favour the assessee has renounced his right to subscribe to such financial asset, the period shall be reckoned from the date of allotment of such financial asset ;

(e) in the case of a capital asset, being the right to subscribe to any financial asset, which is renounced in favour of any other person, the period shall be reckoned from the date of the offer of such right by the company or institution, as the case may be, making such offer ;

(f) in the case of a capital asset, being a financial asset, allotted without any payment and on the basis of holding of any other financial asset, the period shall be reckoned from the date of the allotment of such financial asset ;

(g) in the case of a capital asset, being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a demerger, there shall be included the period for which the share or shares held in the demerged company were held by the assessee ;

(g) in the case of a capital asset, being trading or clearing rights of a recognised stock exchange in India acquired by a person pursuant to demutualisation or corporatisation of the recognised stock exchange in India as referred to in clause (xiii) of section 47, there shall be included the period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation;

(ha) in the case of a capital asset, being equity share or shares in a company allotted pursuant to demutualisation or corporatisation of a recognised stock exchange in India as referred to in clause(xiii) of section 47, there shall be included the period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation;

(hb) in the case of a capital asset, being any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer free of cost or at concessional rate to his employees (including former employee or employees), the period shall be reckoned from the date of allotment or transfer of such specified security or sweat equity shares;

(hc) in the case of a capital asset, being a unit of a business trust, allotted pursuant to transfer of share or shares as referred to in clause (xvii) of section 47, there shall be included the period for which the share or shares were held by the assessee;

(hd) in the case of a capital asset, being a unit or units, which becomes the property of the assessee in consideration of a transfer referred to in clause (xviii)of section 47, there shall be included the period for which the unit or units in the consolidating scheme of the mutual fund were held by the assessee;

(he) in the case of a capital asset, being share or shares of a company, which is acquired by the non-resident assessee on redemption of Global Depository Receipts referred to in clause (b) of sub-section (1) of section 115AC held by such assessee, the period shall be reckoned from the date on which a request for such redemption was made;

(hf) in the case of a capital asset, being equity shares in a company, which becomes the property of the assessee in consideration of a transfer referred to in clause (xb) of section 47, there shall be included the period for which the preference shares were held by the assessee;

(hg) in the case of a capital asset, being a unit or units, which becomes the property of the assessee in consideration of a transfer referred to in clause (xix) of section 47, there shall be included the period for which the unit or units in the consolidating plan of a mutual fund scheme were held by the assessee;

(hh) in the case of a capital asset, being a unit or units in a segregated portfolio referred to in sub-section (2AG) of section 49, there shall be included the period for which the original unit or units in the main portfolio were held by the assessee;

¹³[(hi) in the case of a capital asset, being—

(a) Electronic Gold Receipt issued in respect of gold deposited as referred to in clause (viid) of section 47, there shall be included the period for which such gold was held by the assessee prior to conversion into the Electronic Gold Receipt;

(b) gold released in respect of an Electronic Gold Receipt as referred to in clause (viid) of section 47, there shall be included the period for which such Electronic Gold Receipt was held by the assessee prior to its conversion into gold;]

(ii) In respect of capital assets other than those mentioned in clause (i), the period for which any capital asset is held by the assessee shall be determined subject to any rules which the Board may make in this behalf.

Explanation 2.—For the purposes of this clause, the expression “security” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).

Explanation 3.—For the purposes of this clause, the expressions “specified security” and “sweat equity shares” shall have the meanings respectively assigned to them in the Explanation to clause (d) of sub-section (1) of section 115WB.

Explanation 4.—For the purposes of this clause, the expression “equity oriented fund” shall have the meaning assigned to it in clause (a) of the Explanation to section 112A;

(42B) “short-term capital gain” means capital gain arising from the transfer of a short-term capital asset ;

(42C) “slump sale” means the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to the individual assets and liabilities in such transfer.

Explanation 1.—For the purposes of this clause, “undertaking” shall have the meaning assigned to it in Explanation 1 to clause (19AA).

Explanation 2.—For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities. Explanation 3.—For the purposes of this clause, “transfer” shall have the meaning assigned to it in clause (47);

(43) “tax” in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA ;

(43A) “tax credit certificate” means a tax credit certificate granted to any person in accordance with the provisions of Chapter XXII-B and any scheme made thereunder ;

(43B) [***]

(44) “Tax Recovery Officer” means any Income-tax Officer who may be authorised by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, by general or special order in writing, to exercise the powers of a Tax Recovery Officer and also to exercise or perform such powers and functions which are conferred on, or assigned to, an Assessing Officer under this Act and which may be prescribed;

(45) “total income” means the total amount of income referred to in section 5, computed in the manner laid down in this Act ;

(46) [***]

(47) “transfer”, in relation to a capital asset, includes,—

(i) the sale, exchange or relinquishment of the asset ; or

(ii) the extinguishment of any rights therein ; or

(iii) the compulsory acquisition thereof under any law ; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or

(iva) the maturity or redemption of a zero coupon bond; or

(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or

(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.

Explanation 1.—For the purposes of sub-clauses (v) and (vi), “immovable property” shall have the same meaning as in clause (d) of section 269UA.

Explanation 2.—For the removal of doubts, it is hereby clarified that “transfer” includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;

(47A) “virtual digital asset” means—

(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;

(b) a non-fungible token or any other token of similar nature, by whatever name called;

(c) any other digital asset, as the Central Government may, by notification in the Official Gazette specify:

Following sub-clause (d) shall be inserted after sub-clause (c) of clause (47A) of section 2 by the Finance Act, 2025, w.e.f. 1-4-2026:

(d) any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not such asset is included in sub-clause (a) or sub-clause (b) or sub-clause (c):

Provided that the Central Government may, by notification in the Official Gazette, exclude any digital asset from the definition of virtual digital asset subject to such conditions as may be specified therein.

Explanation.—For the purposes of this clause,—

(a) “non-fungible token” means such digital asset as the Central Government may, by notification in the Official Gazette, specify;

(b) the expressions “currency”, “foreign currency” and “Indian currency” shall have the same meanings as respectively assigned to them in clauses (h), (m) and (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);

(48) “zero coupon bond” means a bond—

(a)issued by any infrastructure capital company or infrastructure capital fund or infrastructure debt fund or public sector company or scheduled bank on or after the 1st day of June, 2005;

(b) in respect of which no payment and benefit is received or receivable before maturity or redemption from infrastructure capital company or infrastructure capital fund or infrastructure debt fund or public sector company or scheduled bank; and

(c) which the Central Government may, by notification in the Official Gazette, specify in this behalf.

Explanation 1.—For the purposes of this clause, the expression “scheduled bank” shall have the meaning assigned to it in clause (ii) of the Explanation to sub-clause (c) of clause (viia) of sub-section (1) of section 36.

Explanation 2.—For the purposes of this clause, the expression “infrastructure debt fund” shall mean the infrastructure debt fund notified by the Central Government in the Official Gazette under clause (47) of section 10.

Notes:

¹ Words “on account of the applicability of the fourth and fifth provisos thereof” shall be omtt. by Act No. 7 of 2025, w.e.f. 1-4-2026. Words “or an Additional Commissioner of Income-tax (Appeals)” omtt. by Act No. 08 of 2023, w.e.f. 1-4-2023.

² by Act No. 15 of 2024, w.e.f. 1-10-2024.

³ by Act No. 7 of 2025, w.e.f. 1-4-2025.

⁴ by Act No. 15 of 2024, w.e.f. 1-10-2024.

⁵ Clauses (c) and (d) ins. by Act No. 7 of 2025, w.e.f. 1-4-2025.

⁶ by Act No. 08 of 2023, w.e.f. 1-4-2024.

⁷ by Act No. 08 of 2023, w.e.f. 1-4-2023.

⁸ by Act No. 08 of 2023, w.e.f. 1-4-2023.

⁹ for “thirty-six” by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

¹⁰ Words “(other than a unit)” omtt by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

¹¹ for “thirty-six”, by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

¹² by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

^12a Omtt by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

¹³ by Act No. 08 of 2023, w.e.f. 1-4-2024.

Income-tax Rules, 1962

Rule – 2BBB

⁵[Percentage of Government Grant for considering university, hospital, etc., as substantially financed by the Government for the purposes of clause (23C) of section 10.

2BBB. For the purposes of sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10, any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty per cent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.]

Rule – 2BC

Amount of annual receipts for the purposes of sub-clauses (iiiad) and (iiiae) of clause (23C) of section 10.

2BC. (1) For the purposes of sub-clause (iiiad) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any university or other educational institution, existing solely for educational purposes and not for purposes of profit, shall be one crore rupees.

(2) For the purposes of sub-clause (iiiae) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, shall be one crore rupees.

Rule – 2C

⁶[Application for the purpose of grant of approval of a fund or trust or institution or university or any hospital or other medical institution under clause (i) or clause (ii) or clause (iii) or clause (iv) of first proviso to clause (23C) of section 10.

2C. (1) An application under clause (i) or clause (ii) or clause (iii) or clause (iv) of first proviso to clause (23C) of section 10 for the grant of approval of a fund or trust or institution, or university or other educational institution or any hospital or other medical institution (hereinafter referred to as ‘the applicant’) shall be made in the following Form, namely:—

(i) Form No. 10A in case of application under [clause (i) or sub-clause (A) of] clause (iv) of first proviso to clause (23C) of section 10 to the Principal Commissioner or Commissioner authorised by the Board; or

(ii) Form No. 10AB in case of application under clause (ii) or [clause (iii) or sub-clause (B) of clause (iv)] of first proviso to clause (23C) of section 10 to the Principal Commissioner or Commissioner under the said proviso.

(2) The application under sub-rule (1) shall be accompanied by the following documents, as required by Form No. 10A or 10AB, as the case may be, namely: —

(a) where the applicant is created or established, under an instrument, self-certified copy of such instrument creating or establishing the applicant;

(b) where the applicant is created or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant;

(c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;

(d) self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act;

(e) self-certified copy of existing order granting approval under clause (23C) of section 10;

(f) self-certified copy of order of rejection of application for grant of approval under clause (23C) of section 10, if any;

(g) where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the applicant relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;

(h) where a business undertaking is held by the applicant as per the provisions of sub-section (4) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business undertaking relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;

(i) where the income of the applicant includes profits and gains of business as per the provisions of sub-section (4A) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;

(j) note on the activities of the applicant.

(3) Form No. 10A or 10AB, as the case may be, shall be furnished electronically,—

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(4) Form No. 10A or 10AB, as the case may be, shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting approval under clause (i) or (iii) of the second proviso read with the ninth proviso to clause (23C) of section 10 in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (i) of sub-rule (1).

(6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in sub-rule (5) after giving an opportunity of being heard, may cancel the approval granted in Form No. 10AC and Unique Registration Number (URN) issued under sub-rule (5), and such approval in Form No. 10AC or such Unique Registration Number (URN) shall be deemed to have never been granted or issued.

(7) In case of an application made under clause (iv) of first proviso to clause (23C) of [section 10 as it stood immediately before its amendment by the Finance Act, 2023,] during previous year beginning on 1st day of April, 2021, the provisional approval shall be effective from the assessment year beginning on 1st day of April, 2022.

(8) In case of an application made in Form No. 10AB under clause (ii) of sub-rule (1), the order of approval or rejection or cancellation under second proviso read with the ninth proviso to clause (23C) of section 10 shall be in Form No. 10AD and in case if the approval is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued, by the Principal Commissioner or Commissioner referred to in second proviso to clause (23C) of section 10.

(9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the form, data structure, standards and procedure of:

(a) furnishing and verification of Form No. 10A or 10AB, as the case may be;

(b) passing the order under second proviso to clause (23C) of section 10;

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the form so furnished or the order so passed.

⁵ Inserted by the IT (Thirteenth Amdt.) Rules, 2014, w.e.f. 12-12-2014.

⁶ Substituted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

⁷ Substituted for “clause (I) or” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁸ Substituted for “clause (III)” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁹ Substituted for “section 10” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

Rule – 11AA

[Requirement for approval of institution of fund under clause (vi) of sub-section (5) of section 80G.

11AA. (1) An application for approval under clause (vi) of sub-section (5) of section 80G, the institution or fund (hereinafter referred to as ‘the applicant’) shall be made in the following Form, namely:—

(a) Form No. 10A in case of application under [clause (i) or sub-clause (A) of] clause (iv) of first proviso to sub-section (5) of section 80G to the Principal Commissioner or Commissioner authorised by the Board; or

⁶⁷[(b) Form No. 10AB in case of application under clause (ii) or clause (iii) or sub-clause (B) of clause (iv) of the first proviso to sub-section (5) of section 80G to the Principal Commissioner or Commissioner authorised under the said proviso.]

(2) The application under sub-rule (1) shall be accompanied by the following documents, as required by Form No. 10A or 10AB, as the case may be, namely: —

(a) where the applicant is created, or established, under an instrument, self-certified copy of the instrument;

(b) where the applicant is created, or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant;

(c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;

(d) self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act;

(e) self-certified copy of existing order granting registration under clause (vi) of sub-section (5) of section 80G;

(f) self-certified copy of order of rejection of application for grant of approval under clause (vi) of sub-section (5) of section 80G, if any;

(g) where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the applicant relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;

(h) note on the activities of the applicant.

(3) Form No. 10A or 10AB, as the case may be, shall be furnished electronically, —

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(4) Form No. 10A or 10AB, as the case may be, shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

(5) On receipt of an application in Form No.10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting approval under clause (i) or (iii) of the second proviso read with third proviso of sub-section (5) of section 80G in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (a) of sub-rule (1).

(6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in sub-rule (5), after giving an opportunity of being heard, may cancel the approval granted in Form No. 10AC and Unique Registration Number (URN), issued under sub-rule (5), and such approval or such Unique Registration Number (URN) shall be deemed to have never been granted or issued.

⁶⁸[(7) In case of an application made under,—

(i) clause (iv) of the first proviso to sub-section (5) of section 80G as it stood immediately before its amendment vide the Finance Act, 2023; or

(ii) sub-clause (A) of clause (iv) of first proviso to sub-section (5) of section 80G, the provisional approval shall be effective from the assessment year relevant to the previous year in which such application is made.]

(8) In case of an application made in Form No. 10AB under clause (ii) of sub-rule (1), the order of approval or rejection or cancellation under second proviso to sub-section (5) of section 80G shall be in Form No. 10AD and in case if the approval is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued, by the Principal Commissioner or Commissioner referred to in second proviso to sub-section (5) of section 80G.

(9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the data structure, standards and procedure of,—

(a) furnishing and verification of Form No. 10A or 10AB, as the case may be;

(b) passing the order under second proviso to sub-section (5) of section 80G;

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made or order so passed as the case may be.

⁶⁵ Substituted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

⁶⁶ Substituted for “clause (i) or” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁶⁷ Substituted by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁶⁸ Substituted by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

Rule – 16CC

[Form of report of audit prescribed under tenth proviso to section 10(23C).

16CC. The report of audit of the accounts of a fund or institution or trust or any university or other educational institution or any hospital or other medical institution which is required to be furnished under clause (b) of the tenth proviso to clause (23C) of section 10 shall be in—

(a) Form No. 10B where—

(I) the total income of such fund or institution or trust or university or other educational institution or hospital or other medical institution, without giving effect to the provisions of the sub-clauses (iv), (v), (vi) and (via) of the said clause, exceeds rupees five crores during the previous year; or

(II) such fund or institution or trust or university or other educational institution or hospital or other medical institution has received any foreign contribution during the previous year; or

(III) such fund or institution or trust or university or other educational institution or hospital or other medical institution has applied any part of its income outside India during the previous year;

(b) Form No. 10BB in other cases.

Explanation.—For the purposes of sub-clause (II) of clause (a), the expression “foreign contribution” shall have the same meaning assigned to it in clause (h) of sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of

⁴⁸ Substituted by the IT (Third Amdt.) Rules, 2023, w.e.f. 1-4-2023.

Rule – 17

⁵¹ [Exercise of option, etc., under Explanation 3 to the third proviso to clause (23C) of section 10 or section 11.

17.(1) The option to be exercised in accordance with the provisions of the Explanation to sub-section (1) of section 11 of the Act in respect of income of any previous year relevant to the assessment year beginning on or after the 1st day of April, 2016 shall be in Form No. 9A and shall be furnished before the expiry of the time allowed under sub-section (1) of section 139 of the Act for furnishing the return of income of the relevant assessment year.

(2) The statement to be furnished to the Assessing Officer or the prescribed authority under clause (a) of the Explanation 3 to the third proviso to clause (23C) of section 10 of the Act or under clause (a) of sub-section (2) of section 11 of the Act or under the said provision as applicable under clause (21) of section 10 of the Act shall be in Form No. 10 and shall be furnished before the expiry of the time allowed under sub-section (1) of section 139 of the Act, for furnishing the return of income.

(3) The option in Form No. 9A referred to in sub-rule (1) and the statement in Form No. 10 referred to in sub-rule (2) shall be furnished electronically either under digital signature or electronic verification code.

(4) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall—

(i) specify the procedure for filing of Forms referred to in sub-rule (3);

(ii) specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule (3), for purpose of verification of the person furnishing the said Forms; and

(iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to Forms so furnished.]

⁵¹ Substituted by the IT (Twenty-fifth Amdt.) Rules, 2022, w.e.f. 1-4-2023.

Rule – 17A

[Application for registration of charitable or religious trusts, etc.

17A. (1) An application under sub-clause (i) or sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) of clause (ac) of sub­section (1) of section 12A for registration of a charitable or religious trust or institution (hereinafter referred to as ‘the applicant’) shall be made in the following Form, namely:—

(i) Form No. 10A in case of application under [sub-clause (i) or item (A) of sub-clause] (vi) of clause (ac) of sub-section (1) of section 12A to the Principal Commissioner or Commissioner authorised by the Board; or

(ii) Form No. 10AB in case of application under sub-clause (ii) or (iii) or (iv) [or (v) or item (B) of sub-clause (vi)] of clause (ac) of sub-section (1) of section 12A to the Principal Commissioner or Commissioner under the said clause.

(2) The application under sub-rule (1) shall be accompanied by the following documents, as required by Form No.10A or 10AB, as the case may be, namely: —

(a) where the applicant is created, or established, under an instrument, self-certified copy of such instrument creating or establishing the applicant;

(b) where the applicant is created, or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant;

(c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;

(d) self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act;

(e) self-certified copy of existing order granting registration under section 12A or section 12AA or section 12AB, as the case may be;

(f) self-certified copy of order of rejection of application for grant of registration under section 12A or section 12AA or section 12AB, as the case may be, if any;

(g) where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the applicant relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;

(h) where a business undertaking is held by the applicant as per the provisions of sub-section (4) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business undertaking relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;

(i) where the income of the applicant includes profits and gains of business as per the provisions of sub-section (4A) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;

(j) self-certified copy of the documents evidencing adoption or modification of the objects;

(k) note on the activities of the applicant.

(3) Form No. 10A or 10AB, as the case may be, shall be furnished electronically, —

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(4) Form No. 10A or 10AB, as the case may be, shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting registration under clause (a), or clause (c), of sub-section (1) of section 12AB read with sub-section (3) of the said section in Form No.10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (i) of sub-rule (1).

(6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in sub-rule (5), after giving an opportunity of being heard, may cancel the registration in Form No. 10AC and Unique Registration Number (URN), issued under sub-rule (5), and such registration or such Unique Registration Number (URN) shall be deemed to have never been granted or issued.

(7) In case of an application made under sub-clause (vi) of clause (ac) of sub-section (1) of [section 12A as it stood immediately before its amendment vide the Finance Act, 2023,] during previous year beginning on 1st day of April, 2021, the provisional registration shall be effective from the assessment year beginning on 1st day of April, 2022.

(8) In case of an application made in Form No. 10AB under clause (ii) of sub-rule (1), the order of registration or rejection or cancellation of registration under sub-clause (ii) of clause (b) of sub-section (1) of section 12AB shall be in Form No.10AD and in case if the registration is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued by the Principal Commissioner or Commissioner referred to in sub-section (1) of section 12AB.

(9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the form, data structure, standards and procedure of,—

(a) furnishing and verification of Form No. 10A or 10AB, as the case may be;

(b) passing the order under clause (a), sub-clause (ii) of clause (b) and clause (c) of sub-section (1) of section 12AB;

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made or order so passed as the case may be.]

⁵² Substituted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

⁵³ Substituted for “sub-clause (i) or” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁵⁴ Substituted for “or (v)” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

^55.Substituted for “section 12A” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

Rule – 17B

[Audit report in the case of charitable or religious trusts, etc.

17B. The report of audit of the accounts of a trust or institution which is required to be furnished under sub-clause (ii) of clause (b) of sub-section (1) of section 12A, shall be in—

(a) Form No. 10B where—

(I) the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12 of the Act, exceeds rupees five crores during the previous year; or

(II) such trust or institution has received any foreign contribution during the previous year; or

(III) such trust or institution has applied any part of its income outside India during the previous year;

(b) Form No. 10BB in other cases.

Explanation.—For the purposes of sub-clause (II) of clause (a), the expression “foreign contribution” shall have the same meaning assigned to it in clause (h) of sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010).]

⁵⁷ Substituted by the IT (Third Amdt.) Rules, 2023, w.e.f. 1-4-2023.

Rule – 17C

Forms or modes of investment or deposits by a charitable or religious trust or institution.

17C. The forms and modes of investment or deposits under clause (xii) of sub-section (5) of section 11 shall be the following, namely :—

(i) investment in the units issued under any scheme of the mutual fund referred to in clause (23D) of section 10 of the Income-tax Act, 1961;

(ii) any transfer of deposits to the Public Account of India;

(iii) deposits made with an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;

(iv) investment by way of acquiring equity shares of a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996);

(v) investment made by a recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter referred to as investor) in the equity share capital of a company (hereafter referred to as investee)—

(A) which is engaged in dealing with securities or mainly associated with the securities market;

(B) whose main object is to acquire the membership of another recognised stock exchange for the sole purpose of facilitating the members of the investor to trade on the said stock exchange through the investee in accordance with the directions or guidelines issued under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by the Securities and Exchange Board of India established under section 3 of that Act; and

(C) in which at least fifty-one per cent of equity shares are held by the investor and the balance equity shares are held by members of such investor;

⁵⁸[(va) investment made by a person, authorised under section 4 of the Payment and Settlement Systems Act, 2007, in the equity share capital or bonds or debentures of a company—

(A) which is engaged in operations of retail payments system or digital payments settlement or similar activities in India and abroad and is approved by the Reserve Bank of India for this purpose; and

(B) in which at least fifty-one per cent of equity shares are held by National Payments Corporation of India;]

⁵⁹[(vb) investment made by a person, authorised under section 4 of the Payment and Settlement Systems Act, 2007 (51 of 2007), in the equity share capital or bonds or debentures of Open Network for Digital Commerce Ltd., being a company incorporated under sub-section (2) of section 7 read with sub­section (1) of section 8 of the Companies Act, 2013 (18 of 2013), for participating in network based open protocol models which enable digital commerce and interoperable digital payments in India;]

(vi) investment by way of acquiring equity shares of an incubatee by an incubator.

Explanation.—For the purposes of this clause,—

(a) “incubatee” shall mean such incubatee as may be notified by the Government of India in the Ministry of Science and Technology;

(b) “incubator” shall mean such Technology Business Incubator or Science and Technology Entrepreneurship Park as may be notified by the Government of India in the Ministry of Science and Technology;

(vii) investment by way of acquiring shares of National Skill Development Corporation;

(viii) investment in debt instruments issued by any infrastructure Finance Company registered with the Reserve Bank of India;

⁶⁰[(ix) investment in “Stock Certificate” as defined in clause (c) of paragraph 2 of the Sovereign Gold Bonds Scheme, 2015, published in the Official Gazette vide notification number G.S.R. 827(E), dated the 30th October, 2015;]

⁶¹[(x) investment by way of acquiring units of POWERGRID Infrastructure Investment Trust.]

⁵⁸ Inserted by the IT (Seventh Amdt.) Rules, 2020, w.e.f. 5-3-2020.

⁵⁹ Inserted by the IT (Tenth Amdt.) Rules, 2022, w.e.f. 22-4-2022.

⁶⁰ Inserted by the IT (Eighth Amdt.) Rules, 2016, w.e.f. 23-3-2016.

⁶¹ Inserted by the IT (Twenty-eighth Amdt.) Rules, 2023, w.e.f. 18-12-2023.

Income Tax Forms

Form No. : 1

¹[Appendix IV
FORM NO. 1
[See rule 11UE (1)]

Undertaking under sub-rule (1) of rule 11UE of the Income-tax Rules, 1962

To,
Principal Commissioner/Commissioner
………… …………….. ………………………………..

Sir/Madam,

I ……………………………………..  (name in block letters) son/daughter of …………………………………… designation …………………………………..  and nationality ………………………………….  and related passport number………………………………….. (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) …………………………………………………………………. on behalf of …………………………………………  (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ………………………………………..  and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be ,hereby declare as follows:

(a) That specified orders have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside India made before the 28th day of May, 2012 and particulars of such specified orders are provided in Part A of the Annexure.

(b) The declarant has (strike off the options that are not applicable),

(i) not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings constituted under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part B of the Annexure;

(ii) filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and has irrevocably withdrawn, on a with prejudice basis, all such appeals or applications or petitions or proceeding and evidence thereof is furnished herewith and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the declarant, are provided in Part C of the Annexure;

(iii) filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the declarant have been disposed of and no further appeal or application or petition or proceeding has been filed by the declarant and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part C of the Annexure;

(iv) filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The declarant further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the declarant and their status as on the date of this undertaking, are provided in Part D of the Annexure;

(c) The declarant has (strike off the options that are not applicable),

(i) not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part B of the Annexure;

(ii) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the declarant, are provided in Part E of the Annexure;

(iii) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the declarant have been disposed of and no further proceeding has been initiated by the declarant and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part E of the Annexure;

(iv) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. Particulars of such pending proceeding and notices filed by the declarant are provided in Part F of the Annexure. The declarant hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders;

(v) received or got any awards, orders, judgments or any other reliefs issued in favour of the declarant, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the declarant or by India and any Indian affiliate. The declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs or relief in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment or any other relief issued in favour of the declarant. The declarant hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part G of the Annexure;

(d) The declarant has (strike off the options that are not applicable),

(i) not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part B of the Annexure;

(ii) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The declarant has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments and evidence thereof is furnished herewith. Particulars of such proceeding, initiated and withdrawn or discontinued by the declarant, are provided in Part H of the Annexure;

(iii) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the declarant have been disposed of and no further proceeding has been filed by the declarant and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part H of the Annexure;

(iv) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, the declarant has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian Affiliate. The declarant hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding are provided in Part I of the Annexure. The declarant also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e).

(e) The declarant hereby undertakes as follows:

(i) to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c), and (d) above, and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, declarant shall act in accordance with this undertaking and in full cooperation with the Republic of India;

(ii) to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the declarant or by Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For the avoidance of doubt, the declarant’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d) above. For further avoidance of doubt, the declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian affiliate to set aside such award, order or judgement ordered, issued or passed in favour of the declarant. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order;

(iii) to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment, or any other relief issued in favour of the declarant.

(f) The declarant specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.

(g) The declarant hereby undertakes to irrevocably terminate, release, discharge and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the declarant under any law for the time being in force, in equity, under any statute or under any agreement entered into by Republic of India with any country or territory outside Republic of India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the declarant or by Republic of India and any Indian affiliate. For the avoidance of doubt, the declarant’s above waiver includes an irrevocable waiver of any claim against India and any Indian Affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the declarant hereby undertakes (for itself and on behalf of all related parties) to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.

(h) The declarant further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking. Where any such claim or right is transferred, the declarant confirms that it has provided the particulars of all the interested parties in Part L, and the undertakings from each of such interested parties is attached with this undertaking in accordance with Part M of the Annexure.

(i) In the event that, notwithstanding the foregoing, any person asserts, brings, files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”) at any time on or after the date of furnishing this undertaking, the declarant shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney’s fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The declarant specifically represents that, to the best of its knowledge, after—

(i) the execution of this undertaking;

(ii) the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

(iii) irrevocable withdrawal of all pending proceeding as outlined in this undertaking,

no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliates. To avoid any doubt, the declarant’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained the declarant’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.

(j) For the removal of any doubt, the declarant fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant fails to obtain any release from such person, the declarant warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.

(k) The declarant further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any person (including but not limited to any related party or interested party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The declarant shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where this Form is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice or press release shall include, among other things, confirmation that,—

(i) the declarant (and its related parties) forever irrevocably forgo any reliance on any right and provisions under any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders;

(ii) the declarant has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliates with respect to any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;

(iii) the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate, including by related parties or interested parties, contrary to the release; and

(iv) the declarant confirms it will treat any such award, judgment or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.

(l) The declarant confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.

(m) The declarant represents and warrants that:

(i) it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j)under applicable law;

(ii) the execution, delivery and performance of this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) has been duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law (see Note 3);

(iii) this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against the declarant in accordance with its terms;

(iv) such authorisations described in the above sub-clauses (i), (ii) and (iii) are effective under applicable law, and to this end, letters from local counsel in the relevant jurisdictions are attached to this undertaking which confirm the legality of such authorisations under applicable law.

(n) The declarant confirms that by submitting the present undertaking, it fulfills the conditions specified in the Explanation below the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9.

(o) The details of the bank account in which the refund may be credited are provided in Part J of the Annexure.

(p) The details of all the interested parties are provided in Part K and Part L of the Annexure. The undertaking in Part M of the Annexure by each of such persons is attached with this undertaking. The declarant represents and warrants that:

(i) all such undertakings have been executed and delivered by the person who has full legal power and authority to execute and deliver such undertakings;

(ii) the execution, delivery and performance of this undertaking has been duly authorised by all necessary corporate action; and

(iii) this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against such person in accordance with its terms. Such separate, related undertakings may take the same form as this undertaking.

(q) The declarant is or is not covered under sub-rule (6) of rule 11UF and in case if the declarant is not covered under said sub-rule all the conditions provided under sub-rule (2) of rule 11UE have been fulfilled.

(r) This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant income-tax authorities, tribunals or courts in Republic of India, as the case may be, which are empowered to decide disputes under the Act.

I also confirm that I am aware of all the consequences and implications of this undertaking.

Place:…………………….
Date: …………………….

Signature
………………………..

Attachments

1. The Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking

2. An indemnity bond to the effect of clause (i) and clause (j) of the undertaking attached in Part N of the undertaking.

3. Copy of the public notice referred to in clause (k) of the undertaking, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.

4. Attachments as required in different parts of the Annexure to this undertaking.

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the declarant are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the declarant; and

(b) record the declarant’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.

VERIFICATION

Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.

Verified at________________ place_______________ on this the_________ day________________ of ______ month_______________ , year                                .

Place:…………………….
Date: …………………….

Signature
……………………….

Annexure

Part A– Particulars of the relevant order or orders:

Sl. No.	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Taxes or penalty determine d	Interest	Total demand	Relief, provided in any appeal proceeding, if any	Demand recovered from the declarant	Pending demand or refund due as on date	Details of the attachments made by any Income-tax Authority
			Section and sub-sectio n of the Income-ta x Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)

Part B– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking).	No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking).	No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking).
(1)	(2)	(3)	(4)	(5)
		Applicable or Not applicable	Applicable or Not applicable	Applicable or Not applicable

Part C: Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding	Date of disposing of or withdrawal such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court accepting the withdrawal or disposing of)
(1)	(2)	(3)	(4)	(5)	(6)

Part D – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clauses (b) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for  Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding
(1)	(2)	(3)	(4)	(5)

Part E – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (ii) and (iii) of clause (c) of the undertaking:

Sr. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued	Date of initiating the proceeding for arbitration, conciliation or mediation/ issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation	Date of disposing of or withdrawal of such proceeding for arbitration, conciliation or mediation, or notices (Please attach evidence of such disposing of or withdrawal, including order of the Tribunal or court or other judicial or quasi-judicial or administrative authority).
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part F – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:

Sl. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending of notices thereof have been issued	Date of initiating the proceeding for arbitration, conciliation or mediation /issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part G – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part A here the relevant order is mentioned	Nature of such award, order or judgment or any other relief	Particulars (including the name of the country) where proceeding related to such award, order, judgment or any other relief were held	Date of such award, order, judgment or any other relief along with reference number	Status of the award, order, judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)

Part H – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of proceeding to enforce such  ward, order or judgment or any other relief	Particulars (including the name of the country) where such proceeding to enforce any  ward, order or judgment or any other relief are taking place	Date of filing proceeding to enforce any  ward, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such  ward, order or judgment or any other relief	Date of disposing of or withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of/ withdrawal, including order of the Court or other judicial authority).
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part I – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clause (iv) of clause (d) of the undertaking:

Sl. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country) where such proceeding to enforce any ward, order or judgment or any other relief are taking place	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part J – Details of bank account in Republic of India to which the refund is to be remitted

Sl. No.	Bank Name and Address	Account Number and other required details for remittance
(1)	(2)	(3)

Part K– Details of all the companies or entities in the entire chain of holding of the declarant till the ultimate holding company or entity of the declarant:

Sl. No.	Name of holding company	Percentage of the ownership by such holding company in the declarant as on the date of undertaking	If the ownership in the declarant is not held directly by such holding company, the chain of ownership with the names of all the companies in the chain of ownership
(1)	(2)	(3)	(4)

Part L- Details of all the interested parties other than the interested parties covered under Part K

Sl. No.	Name of such persons whose interest may be affected directly or indirectly by this undertaking	Nature of interest of such person	Amount of interest of such person (Rs), if available
(1)	(2)	(3)	(4)

PART M Undertaking by person(s) declared in Part K and Part L of the Undertaking

To,
Principal Commissioner/Commissioner

Sir/Madam,

…………………. ……………….

I………………….. (name in block letters) son/daughter of…………………………………………….. designation ……………….. .and nationality …………………………. .and related passport number……………………………… (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) ………………………………. on behalf of …………………………………. . (name of the interested party)
having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) …………………………………………. . and being duly authorised and competent to represent the interested party in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be , hereby declare as follows:

(a) The particulars of specified orders that have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside Republic of India made before the 28th day of May, 2012 in the case of declarant and the nature of interest of the interested party in such specified orders are provided in Part MA of the Annexure.

(b) The interested party has (strike off options that are not applicable):

(i) not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part MB of the Annexure;

(ii) filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn all such appeals or applications or petitions or proceeding or such appeals or applications or petitions or proceeding have been disposed at any time before the date of filing Form No. 1, and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the interested party, are provided in Part MC of the Annexure.

(iii) filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the interested party have been disposed of and no further appeal or application or petition or proceeding has been filed by the interested party and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part MC of the Annexure.

(iv) filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The interested party further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the interested party and their status as on the date of this undertaking, are provided in Part D of the Annexure. Particulars of any appeals or applications or petitions or proceeding as described in this clause (b) which are not covered by the sub-clauses (i) and (ii) are also provided in Part MD of the Annexure.

(c) The interested party has (strike off options that are not applicable):

(i) not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part MB of the Annexure;

(ii) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the interested party, are provided in Part ME of the Annexure.

(iii) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the interested party have been disposed of and no further proceeding has been initiated by the interested party and evidence thereof is furnished herewith. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part ME of the Annexure.

(iv) has initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside Republic of India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e). Particulars of such pending proceeding and notices filed by the interested party are provided in Part F of the Annexure. The interested party hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of any proceeding for arbitration, conciliation or mediation, or notices thereof, which are not covered by the sub-clause (i) and sub- clause (ii), are also provided in Part MF of the Annexure.

(v) received or got any awards, orders, judgements or any other reliefs issued in favour of the interested party, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. The interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic to set aside such award, order or judgment issued in favour of the interested party. The interested party hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part MG of the Annexure.

(d) The interested party has (strike off options that are not applicable):

(i) not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part MB of the Annexure.

(ii) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The interested party has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and withdrawn or discontinued by the interested party, are provided in Part MH of the Annexure.

(iii) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the interested party have been disposed of and no further proceeding has been filed by the interested party and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part MH of the Annexure.

(iv) initiated proceeding to enforce or pursue attachments in respect of any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, interested party has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding, are provided in Part MI of the Annexure. Particulars of any such proceeding, to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief, which are not covered by the sub-clauses (i) and (ii), are also provided in Part MI of the Annexure. The interested party also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e) below.

(e) The interested party hereby undertakes as follows: –

(i) to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against Republic of India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c) and (d) and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, interested party shall act in accordance with this undertaking and in full cooperation with the Republic of India.

(ii) to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order, judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d). The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For further avoidance of doubt, the interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian Affiliate to set aside such award, order or judgment ordered, issued or passed in favour of the interested party. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order.

(iii) to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment, or any other relief issued in favour of the interested party.

(f) The interested party specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.

(g) The interested party hereby undertakes to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the interested party under any law for the time being in force, in equity, under any statute or under any agreement entered into by India with any country or territory outside India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s above waiver includes an irrevocable waiver of any claim against India and any Indian affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the interested party hereby undertakes to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.

(h) The interested party further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking.

(i) In the event that, notwithstanding the foregoing, any person asserts, brings , files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”)at any time on or after the date of furnishing this undertaking, the interested party shall indemnify, defend and hold harmless such releasee from and against any and all costs, expenses (including attorneys’ fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The interested party specifically represents that, to the best of its knowledge, after

(i) the execution of this undertaking;

(ii) the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

(iii) irrevocable withdrawal of all pending proceeding as outlined in this undertaking.

no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliate. To avoid any doubt, the interested party’s indemnity of releasees shall include any claim brought by any third party alleging that it has obtained the interested party’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.

(j) For the avoidance of any doubt, the interested party fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the interested party fails to obtain any release from such person, the interested party warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.

(k) The interested party further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any party (including but not limited to any related party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The interested party shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where Form No. 3 is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice shall include, among other things, confirmation that,-

(i) the interested party forever irrevocably forgoes any reliance on any right and provisions under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders;

(ii) the interested party has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliate with respect to any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;

(iii) the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate contrary to the release; and

(iv) the interested party confirms it will treat any such award, judgment, or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.

(l) The interested party confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.

(m) The interested party represents and warrants that:

(i) it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) under applicable law;

(ii) the execution, delivery and performance of this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) has been duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law (see Note 3);

(iii) this undertaking constitutes the legal, valid and binding obligation of the interested party, enforceable against the interested party in accordance with its terms;

(iv) such authorisations described in the above sub-clauses (i), (ii) and (iii) are effective under applicable law, and to this end, letters from local counsel in the relevant jurisdictions are attached to this undertaking which confirm the legality of such authorisations under applicable law; and

(n) This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant Income-tax authorities, tribunals or courts in India, as the case may be, which are empowered to decide disputes under the Act.

I also confirm that, I am aware of all the consequences and implications of this undertaking.

Place: ……………….. .
Date: ……………………….. .

Signature ………………………

Attachments

1. The Board Resolution and legal authorisation, as referred to in clause (m) of Part M.

2. An indemnity bond to the effect of clauses (i) and (j) of Part M in Part N of the undertaking in Form No. 1;

3. Copy of the public notice referred to in clause (k) of Part M, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.

4. Attachments as required in different parts of the Annexure to Part M of this undertaking

Notes:

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number/Aadhaar Number or Tax Deduction Account Number of the interested party are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

• • record the Signatory’s power and authority to give the undertaking on behalf of the interested party; and
  • record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.

VERIFICATION

Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.

Verified at ______ place_________ on this the ___day ____of___month______ ,_year________ .

Place: ……………..
Date: ……………….

Signature ………………….

………………….

Annexure

Part MA– Particulars of the relevant order or orders:

Sl. No.	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Nature of interest of the interested party
			Section and sub-section of the Income-tax Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)

Part MB– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking).	No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking).	No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking).
(1)	(2)	(3)	(4)	(5)
		Applicable or Not applicable	Applicable or Not applicable	Applicable or Not applicable

Part MC – Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding	Date of disposing of or withdrawal such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court accepting the withdrawal or disposing of)
(1)	(2)	(3)	(4)	(5)	(6)

Part MD – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding
(1)	(2)	(3)	(4)	(5)

Part ME – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clauses (ii) and (iii) of clause (c) of the undertaking:

Sl. No.	Sl. No Part MA where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (Including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued	Date of initiating the proceeding for arbitration, conciliation or mediation/ issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation	Date of disposing of or withdrawal of such proceeding for arbitration, conciliation or mediation, or notices (Please attach evidence of such disposing of or withdrawal, including order of the Tribunal or court or other judicial or quasi-judicial or administrative authority).
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part MF – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (Including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending of notices thereof have been issued	Date of initiating the proceeding for arbitration, conciliation or mediation or issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part MG – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of such award, order or judgment or any other relief	Particulars (Including the name of the country) where proceeding related to such award, order, judgment or any other relief were held	Date of such award, order, judgment or any other relief along with reference number	Status of the award, order, judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)

Part MH – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (Including the name of the country)where such proceeding to enforce any award, order or judgment or any other relief are taking place	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief	Date of disposing of/ withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of or withdrawal, including order of the Court or other judicial authority)
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part MI – Particulars of the proceeding under sub-clause (iv) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (Including the name of the country)where such proceeding to enforce any award, order or judgment or any other relief are taking place	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part N

INDEMNITY BOND

This Indemnity Bond (“Bond”) is made on this………….. day of……….. , 2021 by………….. (name in block letters) son/daughter of………………….. designation and nationality……………………… and related passport number…………….. (hereinafter referred to as “Signatory”) having Permanent Account Number/Aadhaar Number/Tax Deduction Account Number (See Note 1)………………. on behalf of……………. (name of the declarant or interested party, as the case may be) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number………………………… (See Note 2) and being duly authorised and competent to represent the declarant or interested party, as the case may be, in this regard pursuant to Board Resolution or legal authorisation (See Note 3), of the FIRST PART.

And

The Republic of India and any Indian affiliate (hereinafter collectively referred to as “releasees”) of the OTHER PART

WHEREAS:

A. The Income-tax Rules, 1962 have been amended and the Income-tax (31st Amendment) Rules, 2021 have come into force from the date of their publication in the Official Gazette.

B. The declarant or interested party, as the case may be, has filed an undertaking under sub-rule (1) of rule 11UE of the Income -tax Rules, 1962, to which this indemnity bond is annexed. Any defined terms not defined herein shall have the same meaning as the definitions given under rule 11UE and the undertaking.

C. Pursuant to the above, the declarant or interested party, as the case may be, has agreed to indemnify, defend and hold harmless the Republic of India and Indian affiliates from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of any claim at any time after the date of furnishing the undertaking in Form No. 1 by any person, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, and the declarant or interested party, as the case may be, has agreed to furnish an indemnity bond to this effect, such that the declarant or interested party, as the case may be, fully assumes the risk of any omission or mistake with respect to identification and procurement of authorisations and undertakings from any related parties or interested parties as provided in the undertaking, and securing the Republic of India and Indian affiliates from any claim related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief or to the dispute underlying the award against the Republic of India or Indian affiliates in connection with the relevant order or orders.

D. Accordingly the declarant or interested party, as the case may be, is executing this Indemnity Bond in favour of the Republic of India on the terms appearing hereunder.

NOW THIS INDEMINTY BOND WITNESSETH AS FOLLOWS:

1. In the event that any person or entity asserts, brings, files or maintains any claim against any releasee at any time on or after the date of furnishing this undertaking, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, against the Republic of India or Indian affiliates in connection with the relevant order or orders, the declarant or interested party, as the case may be, shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim.

2. The declarant or interested party, as the case may be, specifically represents that, to the best of its knowledge, after—

(i) the execution of this undertaking;

(ii) the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

(iii) withdrawal of all pending proceeding as outlined in this undertaking,

that no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, or any aspect of the dispute underlying the award shall remain outstanding against the Republic of India or other releasee.

Explanation I.-For the removal of any doubt, the declarant’s or interested party’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained declarant’s or interested party’s, as the case may be, claims under an award, judgment or court order or the relevant order or orders.

Explanation II.- the declarant or interested party, as the case may be, fully assumes the risk through this indemnity of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant or interested party, as the case may be, fails to obtain any release from such person, the declarant or interested party, as the case may be, indemnifies through this document the releasees from any defense costs, court costs, and damages.

3. This Indemnity Bond shall be governed by the relevant laws of India and the Delhi High Court shall have sole jurisdiction to entertain and try any dispute or difference arising out of or in connection with the terms of this Bond.

IN WITNESS WHEREOF the undersigned herein has signed and set his hands on this ……………….  day of………… , 2021.

For and on behalf of the declarant or interested party, as the case may be,

__________

Name and address of Witness

Signature of the Witness

1.

2.

Place:
Date:

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the declarant or interested party, as the case may be, are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the declarant or interested party, as the case may be; and

(b) record the declarant or interested party’s power and authority, as the case may be, to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking).]

Form No. : 2

¹[FORM NO. 2
[See rule 11UF]
Form for Certificate Under sub-rule (2) of rule 11UF

<Name of the declarant>
Address of the declarant

Sir/Madam

1. The……………………… (name of the declarant) (hereinafter referred to as the declarant) with Permanent Account Number/Aadhaar number/Tax Deduction Account Number/Company Identification Number and Taxpayer Identification Number……….. has filed an undertaking in Form No. 1 dated………. under sub-rule (1) of the rule 11UE of the rules.

2. Pursuant to the undertaking filed by the declarant in Form No. 1 under sub-rule (1) of rule 11UE, the provisions of fifth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act shall be applicable to the orders mentioned below, subject to the fulfilment of the conditions specified in said proviso read with relevant rules and fulfilment of the undertakings by the declarant in Form No. 1:

TABLE

Sl. No.	Sl. No. of the Table in Part A of Form No. 1 where the relevant order is mentioned	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Taxes or Penalty determined	Interest	Total demand	Relief, provided in any appeal proceeding, if any	Demand recovered from the declarant	Pending demand or refund due as on date	Details of the attachments made by any Income-tax Authority
				Section and sub-section of the Income-tax Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)

3. Demand recovered, as per the column (11) of the Table above, shall be refunded to the declarant, subject to the conditions under sub-rule (2) of the rule 11UE and the provisions of the Act, without any interest as per the provisions of the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act, attachments, if any, the details whereof are provided in column (13) of the Table, shall be revoked and appeals or applications or petitions or proceeding, if any, filed by any income-tax authority or any other person representing the Republic of India with respect to the specified orders, as per column (2) of the Table, shall be withdrawn or intimation shall be sent to the concerned person, on the issue of Form No. 4, as per the procedure provided in sub-rule (16) of rule 11UF. Further, no interest under section 244A of the Act will be payable to the declarant as per the provisions of sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act.

Certificate No…….

Place……
Date

…………….
(Principal Commissioner/Commissioner of Income-tax) ]

Form No. : 3

¹[FORM NO. 3
[See rule 11UF]
Intimation for Withdrawal under sub-rule (3) of rule 11UF of the Income- tax Rules, 1962

To,

The Principal Commissioner/Commissioner

Sir/Madam,

I…(name in block letters) son/daughter of…………………………………………… designation………………… .and nationality …………………………………………………. .and related passport number…(hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number………………………………… (see Note 1) on behalf of……………………………. . (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ……………………………………………. . and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be, hereby confirm that the declarant has received an order in Form No. 2 dated_______

Pursuant thereto, I confirm that the pending appeals or applications or petitions, arbitration, conciliation, mediation, claims or other proceeding, if any, as referred in Part D, Part F, Part G, Part I and Part M of the undertaking in Form No. 1 dated…… have been irrevocably, on a with prejudice basis, withdrawn or discontinued and are not being pursued. The evidence of action taken in this regard are enclosed herewith.

Place…………..
Date……………

………………………….
Signature/Verification

Attachments

1. Attach the Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking.

2. Attach the evidence of action taken as referred above.

VERIFICATION

Verified that the contents of this intimation are true to the best of my knowledge and belief. No part of the intimation is false and nothing has been concealed or misstated therein.

Verified at….. place………. on this the……… day…………. of…. month……… ,…year……….

Place…………..
Date……………

………………………….
Signature/Verification

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the interested party are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking and such Board resolution or legal authorisation shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the interested party; and

(b) record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.]

Form No. : 3AA

[Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AA was inserted by the IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003 and later on amended by the IT (Fifteenth Amdt.) Rules, 2004, w.e.f. 1-4-2005.]

Form No. : 3AAA

[Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AAA was inserted by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987 and later on amended by the IT (Ninth Amdt.) Rules, 1987 and IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003.]

Form No. : 3AB

[Omitted by the IT (Thirty-second Amdt.) Rules, 1999, w.e.f. 19-11-1999. Earlier, Form No. 3AB was inserted by the IT (Amdt.) Rules, 1978 and amended by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987.]

¹ Inserted by the Income-tax (Thirty-first Amendment) Rules, 2021, w.e.f. 1-10-2021.

Tax Reference Tables

Deductions allowable to tax payer

Tax Tutorials

Taxability of income of charitable or religious trusts

A charitable and religious trust is taxable in accordance with the provisions of Section 11 to Section 13. Section 11 provides for exemption in respect of income derived from property held under trust for charitable or religious purposes to the extent to which such income is applied or accumulated during the previous year for such purposes. The exemption is allowed on fulfilment of conditions specified in Section 11, Section 12, Section 12A, Section 12AA/12AB, and Section 13 of the Income-tax Act.

Meaning of ‘Charitable Purpose’

Section 2(15) of the Income-tax Act provides an inclusive definition of ‘charitable purpose’. It includes the following:

(a) Relief of the Poor;

(b) Education;

(c) Yoga;

(d) Medical Relief;

(e) Preservation of the environment (including watersheds, forests, and wildlife);

(f) Preservation of monuments or places or objects of artistic or historic interest; and

(g) Advancement of any other object of general public utility.

The advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of any activity in the nature of trade, commerce or business (or any activity of rendering any service in relation to any trade, commerce or business) for a cess or fee or any other consideration.

This exception, however, does not apply if such activity is undertaken in the course of the actual carrying out of such advancement of any other object of general public utility and the aggregate receipts from such activity during the previous year, do not exceed 20% of the total receipts of such trust during that previous year.

Registration of Trust

The income of a trust shall not be exempt under Section 11 unless it has obtained registration under Section 12AA/12AB. The person in receipt of the income is required to make an application for registration of trust in the prescribed form. The process of registration up to 31-03-2021 is governed by Section 12AA. A new Section 12AB has been inserted with effect from 01-04-2021 which lays down the new process to obtain registration and the period for which such registration shall be granted.

The registration of trusts or institutions shall be required in the following circumstances:

Trust registered under old Section 12A/12AA

The trusts or institutions that had been granted perpetual registration before 01-04-2021 are required to make an application for re-registration under the new scheme of registration under Section 12AB. The registration obtained under Section 12AB shall remain valid for a period of 5 years.

A trust/institution has to make an online application in Form 10A for registration within 3 months from the date on which the provision comes into force. The due date for filing an application for registration has been extended multiple times, and the latest due date is 30-06-2024.

The order of registration shall be passed by the Commissioner within 3 months from the end of the month in which the application for registration is received.

Renewal of Registration

Trusts or institutions are registered under Section 12AB for a period of 5 years. Where the existing registration is due to expire, the trust or institution shall apply for renewal of registration at least six months prior to the completion of the 5 years.

Note: For trusts or institutions whose total income before exemption does not exceed Rs.5 crores in each of the two previous years preceding the year of application, the validity of registration shall be 10 years.

The Finance (No. 2) Act 2024 has amended Section 10(23C) and Section 12A to shift the approval-based category of exemption under Section 10(23C) to registration-based exemption under Section 12AB. Therefore, the trusts or institutions previously approved under Section 10(23C) (iv), (v), (vi), or (via) whose registration is due for renewal on or after 01-10-2024 are now eligible to apply for registration under Section 12A, subject to similar conditions.

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Conversion of provisional registration into regular registration

The trust or institution provisionally registered under Section 12AB shall be required to convert such provisional registration into normal registration by filing an application in Form 10AB at least 6 months before the expiry of the period of the provisional registration or within 6 months of commencement of its activities, whichever is earlier.

After the amendment by the Finance (No. 2) Act 2024, the trusts or institutions provisionally approved under Section 10(23C) (iv), (v), (vi), or (via) whose registration is due for conversion on or after 01-10-2024, are now eligible to apply for registration under Section 12A, subject to similar conditions.

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Registration of trust whose registration has become inoperative

The registration under Section 12AB shall become inoperative if approval is obtained under Section 10(23C) or the institution is notified under Section 10(23EA), 10(23EC), 10(23ED) or Section 10(46) or Section 10(46A) or, the 1st day of April of the previous year relevant to the assessment year for which the exemption is claimed under Section 10 (46B). Thus, if the registration becomes inoperative, the trust or institution will not be entitled to claim an exemption under Section 11 or 12.

The trust or institution, whose registration has become inoperative may apply to get its registration again operative under Section 12AB. The application for registration in such cases shall be made at least 6 months before the assessment year from which the said registration is sought to be made operative. Once the registration becomes operative, the trust or institution will not be entitled to claim an exemption under Section 10(23C)/10(23EA)/10(23EC)/10(23ED)/10(46)/10(46A)/10(46B).

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Registration in conformity with the modified objects

If the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, then such trusts or institutions are required to make an application for fresh registration under this provision. Application for fresh registration in such cases is required to be made within 30 days from the date of adoption or modification of objects of such trust or institution.

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Provisional registration

(a) until 30-09-2023

The new trusts or institutions applying on or before 30-09-2023 for registration under Section 12AB must make the application for provisional registration even if such trusts or institutions have commenced the activities. Subsequently, such trusts or institutions have to convert their provisional registration into regular registration.

The application for provisional registration shall be filed in Form 10A at least 1 month before the commencement of the previous year relevant to the assessment year from which the registration is sought. Such provisional registration shall be valid for a period of 3 years. The trust or institution shall subsequently file an application for conversion of provisional registration into regular registration in Form 10AB at least 6 months before the expiry of the provisional registration period or within 6 months of the commencement of its activities, whichever is earlier.

(b) on or after 01-10-2023

The new trust or institution applying on or after 01-10-2023 shall file an application for provisional registration only if it has not commenced its activities. The trust or institution need not apply for provisional registration if it has commenced activities.

The application for provisional registration shall be filed at least 1 month before the commencement of the previous year relevant to the assessment year from which the registration is sought. Such provisional registration shall be valid for a period of 3 years. The trust or institution shall subsequently file an application for conversion of provisional registration into regular registration at least 6 months before the expiry of the provisional registration period or within 6 months of the commencement of its activities, whichever is earlier.

The order of registration shall be passed by the Commissioner within one month from the end of the month in which the application for registration was received.

Direct regular registration

Until 30-09-2023, the trust or institution has to apply for two registrations (provisional and regular) simultaneously, even if it has commenced the activities. However, on or after 01-10-2023, a trust or institution can apply directly for regular registration if it has already commenced the activities without applying for provisional registration.

The trusts or institutions satisfying the following two conditions can apply directly for regular registration:

(a) A trust/institution that has already commenced its activities.

(b) No income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of Section 10(23C)(iv)/(v)/(vi)/(via), or Section 11 or Section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities.

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Condonation of Delay in Filing Registration Application

The Finance (No. 2) Act, 2024, inserted a proviso to Section 12A(a)(ac) w.e.f. 01-10-2024, to provide that, where the application is filed beyond the time allowed in sub-clauses (i) to (vi), the Principal Commissioner or Commissioner may, if he considers that there is a reasonable cause for delay in filing the application, condone such delay and such application shall be deemed to have been filed within time.

Period for which income is exempt

The exemption to a trust is generally available from the assessment year relevant to the previous year in which the application for registration is made. Hence, once the registration is granted, the exemption under Sections 11 and 12 shall be available from the assessment year immediately following the financial year in which the application is made.

In other words, the exemption shall be available prospectively from the following previous years:

(a) If the trust or institution has applied for the provisional registration at least one month before the subsequent previous year, the exemption shall be available for that subsequent previous year for which the provisional registration has been granted, provided the provisional registration has been converted into a normal registration within the prescribed time limit;

(b) If the trust or institution has applied directly for the normal registration, the exemption shall be available from the previous year in which the application for normal registration has been filed, and the registration has been granted.

Maintenance of Books of Account

To avail the exemption under Section 11 and Section 12, it is mandatory for a trust to keep and maintain books of account and other documents in such form and manner and at such place, as may be provided. This provision applies only if the total income of the charitable trust, without giving effect to the provisions of Sections 11 and 12, exceeds the maximum amount which is not chargeable to income tax in the previous year. The books of account and other documents shall be kept and maintained for a period of 10 years from the end of the relevant assessment year.

Rule 17AA prescribes the books and other documents to be kept and maintained by entities approved under Section 10(23C) or registered under Section 12AB. The books of account and other documents may be kept in the following forms:

(a) Written;

(b) Electronic form;

(c) Digital form;

(d) Print-outs of data stored in electronic or digital form; or

(e) Any other form of electromagnetic data storage device.

Audit of Accounts

Further, to avail the exemption under Section 11 and Section 12, it is mandatory for a trust to get its books of accounts audited. The books of accounts are required to be audited where the total income of the trust before exemption under section 11 and 12 exceeds the maximum amount not chargeable to tax. The accounts of the trust for that year should be audited by a Chartered Accountant. The audit report has to be furnished in Form 10B or Form 10BB at least one month prior to the due date of submission of the return of income.

Filing of return of income

The entities registered under Section 12AB are required to file the return of income under Section 139(4A) if the total income without giving effect to the provisions of Sections 11 and 12 exceeds the maximum amount which is not chargeable to Income-tax.

The exemption shall be available only if the return of income is filed within the time allowed to file the original return of income under Section 139(1) or the belated return of income under Section 139(4). Therefore, it means that the trusts or institutions cannot claim the exemption by filing an updated return of income under Section 139(8A).

Accumulation of Income

An organisation can accumulate 15 per cent of its income indefinitely. In other words, up to 15% of income can be transferred to the corpus every year. Income accumulated or set apart in excess of 15% of the income where such accumulation is not allowed under any specific provisions of the Act shall be taxable under Section 115BBI. The exemption is allowed to a trust for the income accumulated in excess of 15% subject to fulfilment of certain conditions. This exemption, however, shall be withdrawn if such conditions are not complied with by the assessee.

As per Section 11(2), if a trust is not able to apply 85 per cent of its income in a particular year, it can accumulate the shortfall to be used for religious or charitable purposes within the next 5 years. This accumulation is allowed if the assessing officer is informed about the purpose of the accumulation and the period for which the income is being accumulated. The information is to be furnished in Form 10 at least two months prior to the due date specified under Section 139(1) for furnishing the return of income for the previous year.

Even if a charitable institution is not able to utilise 85% of its income for charitable or religious purposes in India, it shall be deemed to be applied for such purposes in the situations described below. Such deemed application of income shall be considered when the institution furnishes the details electronically in Form 9A at least two months prior to the due date specified under Section 139(1) for furnishing the return of income for the previous year.

(a) Where income has not been received in the previous year;

(b) Where income could not be applied due to other reasons.

CBDT Circular No. 6/2023, dated 24-5-2023, clarified that the benefit of deemed application and accumulation shall be available even if Forms 9A and 10 are submitted on or before the due date for filing the return under Section 139(1).

Taxation of income accumulated u/s 11(2)

The circumstances in which the exemption for the accumulated amount under section 11(2) shall be withdrawn and the year in which such amount shall be taxable have been mentioned below:

(a) If the amount is applied for purposes other than religious or charitable or ceases to be accumulated or set apart for application to religious or charitable purposes. It shall be deemed to be the income of the previous year in which it is so applied or ceases to be so accumulated or set apart.

(b) If it ceases to remain invested in the statutory form of investment specified under Section 11(5). It shall be deemed to be the income of such person of the previous year in which it ceases to remain so invested or deposited.

(c) If it is not utilised for the purpose for which it is so accumulated within the allowed period of 5 years. It shall be deemed to be the income of such person of the previous year being the last previous year of the period, for which the income is accumulated or set apart but not utilised for the purpose for which it is so accumulated or set apart.

(d) It is credited or paid to any other trust or institution registered under Section 12AA/12AB or any other fund, institution, trust, hospital, university or other educational institution, or hospital or any other medical institution referred under Section 10(23C)(iv), (v), (vi) and (via). It shall be deemed to be the income of such person of the previous year in which it is credited or paid to such trust, or institution.

The deemed income arising in the above circumstances shall be taxable under Section 115BBI.

Utilisation of income accumulated u/s 11(2)

The amount so accumulated by the trust shall be utilised for the charitable and religious purposes for which it has been created. Until its utilisation, the amount shall be invested in the statutory forms as specified in Section 11(5). Any use of the accumulated funds for any other purpose or if it is not utilised at all, the exemption allowed in the year of accumulation shall be withdrawn.

Where it is beyond the control of the assessee trust or institution to spend the income for which it was accumulated, the Assessing Officer may allow the trust to apply the income so accumulated for any other religious or charitable purposes provided such other purposes are in conformity with the objects of the trust. In such cases, the exemption, granted to the assessee, cannot be withdrawn and the provisions of Section 11(2) will continue to apply.

Statutory form of investment or deposit [Section 11(5) and Rule 17C]

The fund shall be invested or deposited in the following permissible modes:

(a) Immovable property;

(b) Investment in Government Savings Certificates;

(c) Deposit in any Post Office Savings Bank Account;

(d) Deposit in any account with any scheduled bank or a cooperative bank (including a cooperative land mortgage bank or cooperative land development bank);

(e) Investment in units of UTI;

(f) Investment in Central Government or State Government Securities;

(g) Investment in debentures of any corporate body, the principal whereof and the interest whereon are guaranteed by the Central or a State Government;

(h) Investment or deposit in any public sector company. It is to be noted that if the company ceases to a public sector company subsequent to investment or deposit, the investment in shares will be considered as valid for 3 years from the date the company ceases to be a public sector company. Any other investment or deposit will be considered valid until the company repays them.

(i) Investment or deposits in any bonds issued by a financial corporation engaged in providing long-term funds for industrial development in India, if the corporation is eligible for deduction under Section 36(1)(vii);

(j) Investment or Deposits in any bonds issued by any public sector company carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, provided the company is eligible to claim deduction under Section 36(1)(viii);

(k) Deposits with a public sector company or investment in any bonds issued by a public sector company providing long-term finance for urban infrastructure in India.

(l) Deposits with IDBI;

(m) Investment in the units issued under any scheme of mutual fund;

(n) Investment in any transfer of deposit to the Public Account of India;

(o) Deposits with authority constituted in India under any law for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;

(p) Investment by way of acquiring equity shares of a depository as defined in section 2(1)(e) of the Depositories Act, 1996;

(q) Investment in certain securities by a recognised stock exchange;

(r) Investment by way of acquiring equity shares of an incubatee by an incubator;

(s) Investment by way of acquiring shares of National Skill Development Corporation;

(t) Investment in debt instruments issued by any infrastructure finance company registered with the RBI;

(u) Investment in ‘stock certificate’ as defined in paragraph 2(c) of the Sovereign Gold Bonds Scheme, 2015;

(v) Investment made by a person authorised under section 4 of the Payment and Settlement Systems Act, 2007 in the equity share capital or bonds or debentures of a company:

• • Which is engaged in operations of retail payments system or digital payments settlement or similar activities in India and abroad and is approved by the RBI for this purpose; and
  • In which at least 25% of equity shares are held by the National Payments Corporation of India.

(w) Investment made by a person authorised under section 4 of the Payment and Settlement Systems Act, 2007 in the equity share capital or bonds or debentures of Open Network for Digital Commerce Ltd, being a company incorporated under section 7(2) read with section 8(1) of the Companies Act, 2013, for participating in network-based open protocol models which enable digital commerce and inter-operable digital payments in India.

(x) Investment by way of acquiring units of POWERGRID Infrastructure Investment Trust.

Corpus Donation

Any voluntary contributions received by a trust or an institution, created wholly for charitable or religious purposes, with a specified direction (corpus donations) that they shall form part of the corpus of the trust or institution shall not be included in the total income. The corpus donation shall be invested or deposited in one or more of the forms or modes specified in Section 11(5) maintained specifically for such corpus.

Thus, the corpus donation received by an organisation will not be treated as exempt income if it is not invested or deposited in one or more of the forms or modes specified in Section 11(5) maintained specifically for such corpus.

Voluntary contribution for renovation and repair of religious institutions

Where the property held under a trust or institution includes any temple, mosque, gurdwara, church or other place notified under Section 80G(2)(b), any sum received by such trust or institution as a voluntary contribution for renovation or repair of such temple, mosque, etc., may, at its option, be treated as forming part of the corpus of the trust or the institution.

The option can be exercised subject to the fulfilment of the following conditions:

(a) The trust or institution applies such corpus only for the purpose for which the contribution was made;

(b) Such corpus is not utilised for making contributions or donations to any person;

(c) The corpus is maintained in a manner that is separately identifiable; and

(d) The corpus is invested or deposited in the forms specified in Section 11(5).

If the above conditions are violated, the amount of exempt corpus donation shall be deemed to be the income of the institution of the previous year during which the violation took place.

Anonymous Donation

‘Anonymous Donation’ means any voluntary contribution where the person receiving such contribution does not maintain a record of the identity of the donor indicating his name, address, and such other particulars as may be prescribed. The anonymous donations are taxable in the hands of specified trusts (except a religious trust) and institutions only if it exceeds higher of the following limit:

(a) Rs. 1 lakh; or

(b) 5% of total donation received.

The tax shall be levied only on the amount which exceeds higher of the above-referred limit. Anonymous donations are chargeable to tax at the rate of 30% (plus Surcharge and Health & Education Cess).

The exemptions under section 11 are not available to the taxable portion of anonymous donations and they are to be taxed as per the provisions of Section 115BBC. The taxable anonymous donations shall not be subject to 85% application for charitable purposes. However, exempted portions of anonymous donations shall be subject to 85% application for charitable purposes.

Merger of Trust

The Finance (No. 2) Act 2024 inserted a new Section 12AC to facilitate the merger of charitable trusts under the exemption regimes of Sections 10(23C) and 12AB with other trusts or institutions having similar objectives without the imposition of exit tax provisions.

If any trust or institution registered under Section 12AB or approved under sub-clauses (iv), (v), (vi), or (via) of Section 10(23C) merges with another trust or institution, the provisions of Chapter XII-EB shall not apply, provided the following conditions are met:

(a) The other trust or institution has the same or similar objects as the other trust or institution;

(b) The other trust or institution is registered under Section 12AA or Section 12AB or approved under sub-clauses (iv), (v), (vi), or (via) of Section 10(23C);

(c) The merger complies with conditions that may be prescribed by rules.

Taxability of Accreted Income

Income-tax Act provides for the levy of tax on accreted income of a specified person. Such tax is levied to ensure that the benefit conferred to a charitable trust over the years by way of tax exemption is not misused by converting it into a non-charitable organization. The tax on accreted income is levied in the following circumstances:

(a) If a trust is converted into any form which is not eligible for registration under Section 12AA or Section 12AB or approval under sub-clause (iv)/(v)/(vi)/(via) of Section 10(23C);

(b) If a trust is merged with an entity which is not having similar objectives and is not registered under Section 12AA or Section 12AB or approved under sub-clause (iv)/(v)/(vi)/(via) of Section 10(23C);

(c) In case of dissolution, the trust fails to transfer all its assets to any other trust or institution registered under Section 12AA or Section 12AB or approved under sub-clause (iv)/(v)/(vi)/(via) of Section 10(23C) within 12 months from the end of the month in which the dissolution takes place.

When is a specified trust or institution deemed to be converted?

A specified trust or institution shall be deemed to have been converted into any form not eligible for registration under Section 12AA or Section 12AB or approval under Section 10(23C) in the following cases:

(a) If registration granted to it under Section 12AA or Section 12AB or approval under Section 10(23C) has been cancelled; or

(b) If the specified person has modified its objects which do not conform to the conditions of registration or approval and it:

• • has not applied for fresh registration under Section 12AA or Section 12AB or approval under Section 10(23C);
  • has filed an application for fresh registration under Section 12AA or Section 12AB or approval under Section 10(23C), but the said application has been rejected.

(c) If any trust or institution fails to make an application under Section 10(23C) or Section 12A(1)(ac) for:

• • Re-registration/re-approval;
  • Conversion of provisional registration/approval to regular registration/approval;
  • Renewal of registration/approval within the specified period.

Calculation of accreted income

Accreted income shall be the amount of aggregate fair market value (FMV) of the total assets of the specified trust or institution as reduced by the total liability as on the specified date. The specified date shall be the following:

1. the date of the order cancelling the registration under Section 12AAor Section 12AB, or approval under Section 10(23C) as the case may be;

2. the date of adoption or modification of any object;

3. the last date for making an application for registration or approval expires;

4. the date of merger with an entity which is not having similar objectives and is not registered under Section 12AAor Section 12AB or approved under Section 10(23C);

5. the date of dissolution where the specified trust or institution fails to transfer all its assets to any other registered trust or institution.

Payment of Tax

The tax on accreted income shall be levied at the maximum marginal tax rate and this tax is in addition to income-tax chargeable in the hands of a specified person. The specified trust or institution shall be liable to pay the tax on accreted income to the credit of the Central Government within 14 days from the specified date.

If the specified trust or institution fails to pay the tax on the accreted income within the specified time, simple interest at the rate of 1% for every month or part thereof on the amount of such tax shall be charged for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.

Specified income under Section 115BBI

Exemption under Section 11 is available to a trust in respect to the income applied for charitable or religious purposes in India. If the income is applied for purposes other than religious or charitable purposes, it shall be taxable under Section 115BBI. Section 115BBI provides a special rate to tax the following specified income of a specified charitable institution:

(a) Income accumulated or set apart in excess of 15% of the income where such accumulation is not allowed under any specific provisions of the Act;

(b) Deemed income as referred to in Section 11(1B) [option is exercised but the income is not applied in the year of receipt or immediately following the year of receipt or accrual];

(c) If accumulated income is applied for purposes other than religious or charitable purposes or ceases to be accumulated or set apart for application to religious or charitable purposes;

(d) If the amount is applied for purposes other than the objects of the institution approved under Section 10(23C)(iv), (v), (vi) and (via) or ceases to be accumulated or set apart for application thereto;

(e) If accumulated income ceases to remain invested in the statutory form of investment specified under Section 11(5);

(f) If it is not utilised for the purpose for which it is so accumulated within the allowed period of 5 years;

(g) If accumulated income is credited or paid to any other trust or institution registered under Section 12AA/12AB or approved under Section 10(23C)(iv), (v), (vi) and (via);

(h) any income which is not exempt under Section 10(23C) on account of investment in impermissible mode as referred to in Section 11(5);

(i) any income which is not exempt under Section 11/12 on account of investment in impermissible mode as referred to in Section 11(5);

(j) any income which is not exempt under Section 10(23C) on account of its application for the benefit of any interested person;

(k) any income which is not exempt under Section 11/12 on account of its application for the benefit of any interested person;

(l) any income which is not excluded from total income due to its application towards charitable purposes outside India.

The aggregate of the specified income shall be charged to tax at the rate of 30% plus applicable surcharge and cess. Other income (not being a specified income) shall be taxed as per the tax rates applicable to the entity and the nature of income, as the case may be.

Cancellation of registration

The registration can be cancelled by the Principal Commissioner (PCIT) or Commissioner (CIT). The cancellation order, or an order refusing to cancel the registration, shall be passed before the expiry of 6 months. Such period of 6 months shall be calculated from the end of the quarter in which the first notice is issued by the PCIT or CIT calling for any document, information, or making any inquiry. The registration can be cancelled in any of the following situations:

PCIT/CIT notices the occurrence of the specified violation

The cancellation proceedings can be initiated if the PCIT/CIT has noticed the occurrence of a specified violation, and the violation need not be noticed only upon assessment. If the CIT independently concludes that there has been a specified violation, he can suo moto take cognizance of such violation even before the assessment by the Assessing Officer. The following shall be considered as ‘Specified Violation’:

(a) If any income derived from a property held under trust, wholly or in part, has been applied other than for the objects of the trust or institution.

(b) If the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives.

(c) If separate books of account are not maintained by the trust or institution in respect of the business, which is incidental to the attainment of its objectives.

(d) If the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public.

(e) If the trust or institution established for charitable purposes has applied any part of its income for the benefit of any particular religious community or caste.

(f) If any activity being carried out by the trust or institution is not genuine or is not being carried out in accordance with the conditions subject to which it was registered.

(g) If the trust or institution has not complied with the requirement of any other law for the time being in force as is material to achieve its objects, and the order, direction, or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality.

(h) If the application referred to in Section 12A(1)(ac) contains false or incorrect information. Hence, the PCIT/CIT can also initiate the cancellation proceedings if the registration application filed by the trust or institution contains false or incorrect information.

Reference is received from AO

If the Assessing Officer is satisfied about the specified violation committed and the PCIT or CIT has received a reference from him for any previous year under the second proviso to Section 143(3).

Selection of case with Risk Management Strategy

Cancellation proceedings can be initiated if the case is selected in accordance with Risk Management Strategy formulated from time to time.

Consequences of cancellation of registration

The following consequences may arise on the cancellation of the registration of a trust:

(a) The exemption under Sections 11 and 12 would not be available;

(b) The income will be computed under the normal provisions of the Act;

(c) Any donation or aid to an individual will be regarded as his income taxable under Section 56(2)(x) if it exceeds the threshold limit of Rs. 50,000;

(d) The approval granted under Section 80G may be cancelled;

(e) Levy of accreted tax under Section 115TD.

Withdrawal of exemption

The exemption to a charitable or religious organisation will be withdrawn if any of the provisions of Section 13 are violated, even if other conditions of Sections 11, Section 12, and Section 12A are complied with. Thus, incomes which are otherwise exempt will not be exempted if the provisions of Section 13 are contravened. An organisation, under the following circumstances, may lose its exemptions under Section 11 and Section 12:

(a) The exemption under Section 11 and Section 12 shall not be available if any part of the income from the property held under a trust for private religious purposes does not enure for the benefit of the public.

(b) If a charitable trust or institution is created for the benefit of any particular religious community or caste, no part of the income applied to such purposes is exempt from tax.

(c) If part of the income is used or applied for the benefit of an interested person, then only such part of the income shall not be considered for the exemption to the trust or institution. The exemption for the balance income shall not be withdrawn just because a part of the income is applied for the benefit of the interested person.

The following persons are categorised as ‘interested person’:

(a) The author of the trust or the founder of the institution;

(b) Any person who has made a total contribution up to the end of the relevant previous year of an amount exceeding Rs.1 lakh or his total contribution during the lifetime of the trust up to the end of previous year exceeds Rs.10 lakhs

(c) Where the author, founder or substantial contributor is a HUF, a member of the HUF;

(d) Any trustee of the trust or manager of the institution;

(e) Any relative of such author, founder, member, trustee or manager as aforesaid; and

(f) Any concern in which any of the persons referred to above [except (b)] has a substantial interest.

Meaning of Relative

Relative in relation to an individual means:

✓ Spouse of the individual;

✓ Brother or sister (and their spouses) of the individual;

✓ Brother or sister (and their spouses) of the spouse of the individual;

✓ Any lineal ascendant or descendant (and their spouses) of the individual;

✓ Any lineal ascendant or descendant (and their spouses) of the spouse of the individual;

✓ Any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.

Meaning of Substantial Interest

A person is deemed to have a substantial interest in concern if he (or along with ‘interested persons’ as mentioned above) at any time during the previous year:

✓ Holds at least 20% of equity share capital, in case of a company; or

✓ Entitled to at least 20% of profits in the case of any other concern.

When is an Interested Person deemed to be benefited?

The income or the property of the trust shall be deemed to have been applied for the benefit of an interested person in the following cases.

• • Loan without adequate interest or security
  • Use of property without adequate rent
  • Excess payment of salary
  • Inadequate remuneration for services rendered
  • Excess payment for purchases of any share, security or other property
  • Inadequate consideration for sales of any share, security or other property
  • Diversion of income or property where the aggregate value exceeds Rs. 1,000
  • Investment in concern in which an interested person has a substantial interest

(d) If funds are deposited or invested in impermissible mode, then only income to the extent of such deposit or investment shall not be considered for the exemption. The exemption for the balance income shall not be withdrawn just because funds are deposited or invested in an impermissible mode.

(e) The exemptions under Section 11 and Section 12 shall not be available in respect of the anonymous donations taxable as per the provisions of Section 115BBC.

(f) The exemptions under Section 11 and Section 12 shall not be available if the trust violates the proviso to Section 2(15). In other words, the exemption shall be withdrawn if a trust is engaged in business activity and the aggregate receipts from such activity during the previous year exceed 20% of the total receipts.

(g) The exemption shall not be available for the amount accumulated under section 11(2) if the Form 10 and Income-tax return for the corresponding financial year are not submitted within the due date prescribed under Section 139(1).

Computation of Income under special circumstances

In the following situations, the income chargeable to tax shall be computed after allowing a deduction for expenditure incurred for the objects of the institution:

(a) where the provision of section 13(8) is applicable

(b) the institution has not obtained the audit report [section 12A(1)(b)(ii)]

(c) the institution has not maintained books of account in the prescribed form [section 12A(1)(b)(i)]

(d) the institution has not furnished the return of income within the time allowed under section 139(4A) [section 12A(1)(ba)]

Income to be computed after deduction of expenditure

The income chargeable to tax due to withdrawal of exemption shall be computed after allowing a deduction for expenditure (other than capital expenditure) incurred in India for the objects of the institution. The deduction is allowable subject to the satisfaction of the following conditions:

(a) The expenditure is not from the amount of corpus donations credited in the books of account up to the end of the financial year immediately preceding the relevant previous year;

(b) The expenditure is not from any loan or borrowing;

(c) Depreciation shall not be allowed in respect of an asset whose full cost has been claimed as an application of income;

(d) The expenditure is not in the form of contribution or donation to any person.

No deduction is to be allowed of certain expenditure

The income shall be computed without deduction of the following expenditures:

(a) No deduction shall be allowed for the capital expenditure;

(b) Disallowance shall be made under Section 40(a)(ia) for the default made in deduction of tax;

(c) Disallowance shall be made Section 40A(3)/40A(3A) for the payment made in cash;

(d) No deduction shall be allowed for the expenditure not incurred in India.

It should be noted that the disallowance made of the above expenditure or allowance shall not be allowed as a deduction to the assessee under any other provision. Further, if any loss arises due to such expenditure, no set-off shall be allowed for such losses.

MCQs on Taxability of charitable or religious trusts

Q1. Which of the following purposes are covered in the definition of charitable purpose?

(a) Education

(b) Yoga

(c) Medical Relief

(d) All of the above

Correct answer – (d)

Explanation: Section 2(15) of the Income-tax Act provides an inclusive definition of ‘charitable purpose’. It includes the following:

(a) Relief of the Poor;

(b) Education;

(c) Yoga;

(d) Medical Relief;

(e) Preservation of the environment (including watersheds, forests, and wildlife);

(f) Preservation of monuments or places or objects of artistic or historic interest; and

(g) Advancement of any other object of general public utility.

Q2. Where the existing registration under Section 12AB is due to expire, the trust or institution shall apply for renewal of registration at least ________ prior to the completion of the 5 years.

(a) 6 months

(b) 3 months

(c) 1 month

(d) 15 days

Correct answer – (a)

Explanation: Trusts or institutions are registered under Section 12AB for a period of 5 years. Where the existing registration is due to expire, the trust or institution shall apply for renewal of registration at least six months prior to the completion of the 5 years. For trusts or institutions whose total income before exemption does not exceed Rs.5 crores in each of the two previous years preceding the year of application, the validity of registration shall be 10 years.

Q3. What is the time limit to convert provisional registration into normal registration where the trust or institution is provisionally registered under section 12AB?

(a) At least 6 months before the expiry of the period of the provisional registration

(b) Within 6 months of the commencement of its activities

(c) Earlier of (a) and (b)

(d) None of the above

Correct answer – (c)

Explanation: The trust or institution provisionally registered under Section 12AB shall be required to convert such provisional registration into normal registration by filing an application in Form 10AB at least 6 months before the expiry of the period of the provisional registration or within 6 months of commencement of its activities, whichever is earlier.

Q4. The exemption under sections 11 and 12 shall be available only if the return of income is filed within the time allowed to file the return of income under ________.

(a) Section 139(1)

(b) Section 139(4)

(c) Either (a) or (b)

(d) Section 139(8A)

Correct answer – (c)

The exemption under sections 11 and 12 shall be available only if the return of income is filed within the time allowed to file the original return of income under Section 139(1) or the belated return of income under Section 139(4).

Q.5. Which of the following are the statutory form of investment or deposit specified under section 11(5)?

(a) Immovable property

(b) Investment in Government Savings Certificates

(c) Deposit in any Post Office Saving Bank Account

(d) All of the above

Correct answer – (d)

Explanation: Immovable property, Investment in Government Savings Certificates, and Deposit in any Post Office Savings Bank Account all are covered in the list of statutory forms of investment or deposit specified under Section 11(5).

Q6. The anonymous donations are taxable in the hands of specified trusts (except a religious trust) and institutions only if it exceeds ________.

(a) Rs. 1 lakh

(b) 5% of the total donation received

(c) Higher of (a) and (b)

(d) Lower of (a) and (b)

Correct answer – (c)

Explanation: The anonymous donations are taxable in the hands of specified trusts (except a religious trust) and institutions only if it exceeds higher of the following limit:

(a) Rs. 1 lakh; or

(b) 5% of total donation received.

Q7. What are the consequences of cancellation of the registration of a trust?

(a) Exemption under sections 11 and 12 would not be available

(b) Income will be computed under the normal provision of the Act

(c) Approval granted under section 80G may be cancelled

(d) All of the above

Correct answer – (d)

Explanation: The following consequences may arise on the cancellation of the registration of a trust:

(a) The exemption under Sections 11 and 12 would not be available;

(b) The income will be computed under the normal provisions of the Act;

(c)Any donation or aid to an individual will be regarded as his income taxable under Section 56(2)(x) if it exceeds the threshold limit of Rs. 50,000;

(d) The approval granted under Section 80G may be cancelled;

(e) Levy of accreted tax under Section 115TD.

Q8. Which of the following persons can be categorised as interested person?

(a) Author of the trust

(b) Any trustee of the trust

(c) Any relative of such author or trustee

(d) All of the above

Correct answer – (d)

Explanation: The following persons are categorised as ‘interested person’:

(a)The author of the trust or the founder of the institution;

(b) Any person who has made a total contribution up to the end of the relevant previous year of an amount exceeding Rs.1 lakh or his total contribution during the lifetime of the trust up to the end of previous year exceeds Rs.10 lakhs.

(c) Where the author, founder or substantial contributor is a HUF, a member of the HUF;

(d) Any trustee of the trust or manager of the institution;

(e)Any relative of such author, founder, member, trustee or manager as aforesaid; and

(f) Any concern in which any of the persons referred to above [except (b)] has a substantial interest.

Q9. In which cases, an Interested Person deemed to be benefited?

(a) Loan given without adequate interest or security

(b) Excess payment of salary

(c) Inadequate remuneration for service rendered

(d) All of the above

Correct answer – (d)

Explanation: The income or the property of the trust shall be deemed to have been applied for the benefit of an interested person in the following cases.

• Loan without adequate interest or security
• Use of property without adequate rent
• Excess payment of salary
• Inadequate remuneration for services rendered
• Excess payment for purchases of any share, security or other property
• Inadequate consideration for sales of any share, security or other property
• Diversion of income or property where the aggregate value exceeds Rs. 1,000
• Investment in concern in which an interested person has a substantial interest

Exemption to Educational, Medical, Charitable and Religious Institutions under Section 10(23C)

Introduction

Section 10(23C) of the Income-tax Act provides tax exemption to specific funds and institutions engaged in educational, medical, charitable, or religious activities. The exemption is available either unconditionally or subject to approval and fulfilment of prescribed conditions.

Scope of Section 10(23C)

This clause exempts the income of specified institutions from total income. It applies to:

• Certain Government-established funds (unconditionally exempt);
• Educational and medical institutions substantially financed by the Government or with annual receipts not exceeding Rs. 5 crore;
• Other eligible institutions, upon approval by the Principal Commissioner or Commissioner.

Categories of Exempt Institutions

• Institutions Not Requiring Approval

The following are exempt unconditionally or based on defined thresholds:

– Funds under sub-clauses (i) to (iiiaaaa), including:

➢ Prime Minister’s National Relief Fund

➢ PM CARES Fund

➢ PM Fund for the promotion of Folk Art

➢ PM Aid to Students Fund

➢ National Foundation for Communal Harmony

➢ Swachh Bharat Kosh

➢ Clean Ganga Fund

➢ Chief Minister’s Relief Fund

➢ Lieutenant Governor’s Relief Fund

– Educational and medical institutions under sub-clauses (iiiab) to (iiiae) that are:

➢ Wholly or substantially financed by the Government, or

➢ Having annual receipts not exceeding Rs. 5 crore.

– Institutions Requiring Approval

Exemption under the following sub-clauses is available only upon approval by the Principal Commissioner or Commissioner:

• Sub-clause (iv): Funds or institutions established for charitable purposes
• Sub-clause (v): Trusts or institutions wholly for public religious or public religious and charitable purposes
• Sub-clause (vi): Universities or educational institutions existing solely for education and not for profit
• Sub-clause (via): Hospitals or institutions for medical or rehabilitative care operating solely for philanthropic purposes and not for profit

Conditions for Claiming Exemption

♦ Approval by Competent Authority

Institutions claiming exemption under sub-clauses (iv), (v), (vi), or (via) of Section 10(23C) must apply for approval in the prescribed form and manner. Approval can be provisional (up to 3 years) or final (up to 5 years). Approval becomes inoperative if the institution is notified under Section 10(46) or 10(46A).

Note: No new applications for approval or provisional approval under Section 10(23C) shall be entertained on or after 01-10-2024. The approval shall be granted by the Principal Commissioner or Commissioner only if the application for approval is made before 01-10-2024. Existing approvals remain valid until expiry, after which the institution may apply under the Section 12A regime.

♦ Computation of Income

The manner of computation differs depending on whether the institution requires approval.

• Computation for Institutions not requiring Approval

➢ Includes Government funds and educational/medical institutions.

➢ Government funds are exempt without return filing.

➢ Educational and medical institutions must file returns under Section 139(4C), but are allowed unrestricted accumulation of income.

➢ No threshold limit or specific time for application of income applies.

• Computation for Institutions Requiring Approval

➢ Income includes donations and receipts from main and incidental objects.

➢ Deduct application of income (revenue/capital expenditure, permitted corpus usage, loan repayments).

➢ Accumulation allowed:

• • • Up to 15% of income without restriction
    • Additional accumulation for 5 years, subject to compliance.

Additional Inclusions:

➢ Disallowances for TDS default, cash payments, or misuse of accumulated income

➢ Anonymous donations (taxable under Section 115BBC)

♦ Key Points in Income Computation

➢ Inclusions: All income under Section 2(24), including donations.

➢ Commercial Activities:

• • Must be incidental and supported by separate books.
  • For ‘general public utility’ objects, commercial receipts must not exceed 20% of total receipts.

➢ Anonymous Donations: Taxable if exceeding limits prescribed in Section 115BBC.

➢ No Other Exemptions: Only agricultural income is excluded.

➢ No Deduction for:

• • Corpus donations given to other institutions
  • Expenditure out of corpus or loans (unless repaid and reinvested as per rules)
  • Payments exceeding Rs. 10,000 made in non-permissible modes
  • Payments without TDS (30% disallowed)
  • Benefits to related persons under Section 13(3)

➢ Claim of Depreciation: Not allowed on assets acquired from income already treated as application.

➢ Set-off of Losses: Not permitted for excess application from prior years.

➢ Application on Payment Basis: Allowed in the year of actual payment only.

➢ Accumulation: Permissible up to 15%, or for specific purposes for 5 years.

♦ Treatment of Special Receipts

➢ Corpus Donations: Exempt if invested in Section 11(5) modes.

➢ Voluntary Donations for Religious Renovations: May be treated as corpus if conditions are met.

➢ Donations in Kind: Counted as income and treated as an application if used for charitable purposes.

♦ Special Computation Scenarios – Applicable when books are not maintained, accounts are not audited, return not filed, or conditions of Section 2(15) are violated:

➢ Only revenue expenditure allowed, excluding:

• • Expenditure from the corpus or loans
  • Capital expenses
  • Depreciation on assets which have already been claimed as application
  • Payments in cash or without TDS
  • Donations to others

➢ No deduction shall be allowed in respect of any expenditure or allowance or set-off of any loss under any other provision of the Act.

♦ Investment of Funds

Funds must be invested in modes specified under Section 11(5), except for certain grandfathered or notified assets. Non-compliance renders the relevant income taxable under Section 115BBI.

♦ Books of Account

Institutions having income before exemption exceeding the basic exemption limit must maintain books of account in the prescribed form and manner.

♦ Audit Requirement

Audit by a Chartered Accountant is mandatory for institutions having income before exemption exceeding the basic exemption limit, and the report (Form 10B or 10BB) must be filed one month before the due date under Section 139(1).

♦ Filing of Return

Institutions must file their return within the timelines under Section 139(1) or 139(4). Exemption is not allowed if the return is filed under Section 139(8A).

♦ Other Provisions

• Mutual Exclusivity with Section 11/12 – Institutions must choose between registration under Section 12AB and approval under Section 10(23C); both cannot be availed simultaneously.
• Tax on Anonymous Donations – Taxable under Section 115BBC if exceeding Rs. 1 lakh or 5% of total donations. Only the excess is taxed.
• Merger of Trusts – Merger is allowed under Section 12AC, subject to conditions. Chapter XII-EB does not apply if conditions are fulfilled.
• Tax on Accreted Income – Tax is levied at the maximum marginal rate in cases of conversion, merger with non-eligible entities, or non-transfer of assets on dissolution.
• Special Tax Rate under Section 115BBI – Specific incomes not qualifying for exemption are taxed at special rates, including income not applied for charitable purposes or invested in impermissible modes.

Accumulation of Income by Fund or Institution Approved under Section 10(23C)

Funds or institutions approved under Section 10(23C) may accumulate income for future application to specified purposes, subject to prescribed conditions. Accumulation beyond 15% requires a declaration and compliance with investment norms.

♦ Conditions for Accumulation

Income accumulated in excess of 15% shall not be included in total income if the following are satisfied:

• A statement in Form 10 is submitted, specifying the purpose and period of accumulation;
• The accumulated amount is invested in modes specified under Section 11(5);
• Form 10 is furnished on or before the due date under Section 139(1) for filing the return of income.

♦ Period of Accumulation

The maximum period for which income can be accumulated is 5 years. Any period during which the application is stayed by a court order is excluded from this period.

♦ Taxation of Accumulated Income

Accumulated income shall be taxed if:

• Applied for purposes other than the approved objects;
• Ceases to be accumulated;
• Ceases to remain invested in specified modes;
• Not utilised within the stipulated 5-year period;
• Credited or paid to another registered or approved institution.

♦ Change in Purpose of Accumulation

If accumulated income cannot be applied for its original purpose due to uncontrollable circumstances, the institution may apply to the Assessing Officer for a change in purpose, subject to:

• The new purpose being within India;
• The new purpose aligns with the institution’s approved objects;
• No payment is made to other trusts or institutions registered under Section 12AB/12AA or approved under Section 10(23C).

Cancellation of Approval under Section 10(23C)

Approval or provisional approval granted under Section 10(23C) may be cancelled by the Principal Commissioner or Commissioner (PCIT/CIT) if a “specified violation” is found to have occurred in any previous year.

♦ Grounds for Cancellation

The PCIT/CIT may initiate cancellation in the following cases:

• On detecting one or more specified violations during any previous year;
• On receipt of a reference from the Assessing Officer under the second proviso to Section 143(3);
• If the case is selected under the Board’s risk management strategy.

♦ Specified Violations

A fund or institution shall be considered in violation if:

• Income is applied for purposes other than the approved objects;
• It has business income not incidental to its objectives;
• It fails to maintain separate books for incidental business;
• Its activities are not genuine or not aligned with the approval conditions;
• It fails to comply with any material legal requirement, and such failure is established by a final order or decree;
• The application for approval is incomplete or contains false or incorrect information.

♦ Procedure for Cancellation

The PCIT/CIT must:

• Call for information or conduct inquiries to verify any specified violation;
• Provide the institution with a reasonable opportunity of being heard;
• If satisfied of a violation, pass a written order cancelling the approval for the relevant and subsequent years;
• If not satisfied, pass a written order refusing cancellation.

A copy of the order must be forwarded to the Assessing Officer and the concerned institution.

♦ Time Limit for Passing Order

The cancellation or refusal order must be passed within 6 months from the end of the quarter in which the first notice seeking documents or information was issued.

Taxation of Charitable and Religious Trusts

Introduction

Charitable and religious trusts are eligible for exemption under Sections 11 to 13 of the Income-tax Act, subject to registration under Section 12AB and compliance with prescribed conditions. Section 10(23C) also provides an exemption for certain specified institutions.

Exemption under Section 10(23C)

Exemption is available to specified funds or institutions (e.g., PM CARES, educational institutions, hospitals, charitable or religious institutions). No new application for approval under Section 10(23C) is permitted to be filed on or after 01.10.2024. The approval shall be granted by the Principal Commissioner or Commissioner only if the application for approval is made before 01-10-2024. Existing approvals remain valid until expiry, after which the institution may apply under the Section 12A regime.

Exemption under Sections 11 and 12

Income from property held under trust is exempt if applied/accumulated for charitable/religious purposes and other specified conditions are fulfilled under Sections 11 to 13.

♦ Meaning of Charitable Purpose [Section 2(15)]

Section 2(15) of the Income-tax Act defines “charitable purpose” through seven limbs—six specific and one general. The last limb, “advancement of any other object of general public utility, ” restricts commercial activities beyond a prescribed threshold.

• Relief of the Poor
• Education
• Yoga
• Medical Relief
• Preservation of Environment, including watersheds, forests, and wildlife
• Preservation of Monuments or Artistic/Historic Objects
• Advancement of any other object of General Public Utility – A residuary category covering other charitable purposes. However, if activities involve trade, commerce or business (or related services) for a fee, it ceases to be a charitable purpose unless:

➢ Such activity is undertaken in actual advancement of the object; and

➢ Aggregate receipts from such activity do not exceed 20% of the total receipts of the trust during that previous year.

This restriction does not apply to the first six limbs of charitable purpose, which can carry out business activities without the 20% cap if incidental to their objects.

♦ Conditions for claiming exemption

Section 12A prescribes the conditions that a charitable institution must fulfil to be eligible for exemption under Sections 11 and 12. Among these essential conditions are registration under Section 12AB, maintenance of books of account, audit of accounts, and filing of the income tax return.

♦ Procedure for Registration of Trusts

Section 12AB governs the registration of charitable or religious trusts. Registration is mandatory to claim exemptions under Sections 11 and 12. The new regime includes provisional registration (valid up to 3 years) and final registration (granted for 5 or 10 years). Trusts registered before 31-03-2021 under Section 12AA must re-register under Section 12AB.

▪ Scheme of Registration under Section 12AB – Registrations fall into three categories:

➢ Re-registration of Existing Trusts [Section 12AB(1)(a)]

➢ Normal Registration [Section 12AB(1)(b)]

➢ Provisional Registration [Section 12AB(1)(c)]

♦ Re-registration of Existing Trusts – Trusts with registration under Section 12A/12AA must apply for re-registration in Form 10A . The deadline, initially 30-06-2021, has been extended to 30-06-2024.

➢ PCIT/CIT must grant registration within 3 months without conducting enquiries.

➢ Validity: 5 years (or 10 years if eligible).

♦ Normal Registration – Applicable in the following cases:

➢ Renewal of expiring registration

➢ Conversion from provisional to regular registration

➢ Reactivation of inoperative registration

➢ Modification of objects

➢ Direct registration after commencement of activities

➢ Application must be filed in Form 10AB within the stipulated timelines.

➢ PCIT/CIT may conduct enquiries and verify the genuineness of activities and compliance with applicable laws.

➢ Registration is granted or denied within 6 months from the end of the quarter in which the application is received.

➢ Validity: 5/10 years.

♦ Provisional Registration – Applicable where the trust has not commenced activities.

➢ Application to be filed in Form 10A at least one month before the relevant previous year.

➢ PCIT/CIT must grant provisional registration within one month.

➢ Validity: 3 years from the assessment year for which registration is sought.

➢ Must be converted to regular registration at least 6 months before expiry or within 6 months of activity commencement.

♦ Condonation of Delay – Delayed applications under any clause of Section 12A(1)(ac) may be condoned by the PCIT/CIT if reasonable cause is shown.

♦ Extended Validity for Small Trusts [Finance Act, 2025] – Trusts applying under sub-clauses (i) to (v) of Section 12A(1)(ac) with total income (before exemption under Sections 11/12) not exceeding Rs. 5 crore in each of the 2 preceding years shall be granted registration for 10 years.
This extended validity applies to registrations granted on or after 01-04-2025.

♦ Ineligible for Extended Validity – The 10-year registration is not available for first-time applicants under Section 12A(1)(ac)(vi), i.e.:

➢ Trusts applying for provisional registration before commencing activities

➢ Trusts seeking direct registration after commencing activities

♦ Form for Registration of Trust under Section 12AB

Trusts or institutions seeking exemption under Sections 11 and 12 must register under Section 12AB using Form 10A or Form 10AB . These forms are filed electronically using a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC), as applicable.

♦ Form 10A :

➢ For re-registration of trusts registered under Section 12A or 12AA before 01-04-2021

➢ For provisional registration

♦ Form 10AB :

➢ For renewal of registration

➢ Conversion of provisional registration into regular registration

➢ Activation of inoperative registration

➢ Registration after modification of objects

➢ Direct regular registration post commencement of activities

These forms are also used for applications under Section 10(23C), Section 35, and Section 80G(5).

♦ Filing and Processing of Form 10A – Applications in Form 10A are processed by the Director of Income-tax (CPC), Bengaluru, who issues the order in Form 10AC and allocates a 16-digit Unique Registration Number (URN). If the application is incomplete or contains false information, registration may be cancelled after a hearing.

♦ Documents Required with Form 10A

➢ Self-certified copies of the founding instrument or documents of creation

➢ Relevant registration certificates (RoC, FCRA, prior approvals, etc.)

➢ Annual accounts (last 3 years if applicable)

➢ Nil declarations or affidavits if certain documents are not available

♦ Filing and Processing of Form 10AB – Filed for renewal or conversion to regular registration. The PCIT/CIT may issue notices for further documents or clarification. The final order is issued in Form 10AD along with the URN.

♦  Documents Required with Form 10AB

➢ Founding documents

➢ Past registration or rejection orders

➢ Annual accounts (up to 3 preceding years)

➢ Audit reports (if applicable under Section 44AB)

➢ Note on activities and modified object documents (if applicable)

♦ Conditions for Order Granting Registration – Conditions applicable to orders in Form 10AC or Form 10AD include:

➢ Income must be applied in line with the trust’s objects

➢ Business income must be incidental and separately accounted for

➢ No application of income for private religious purposes or specific religious communities

➢ Compliance with other applicable laws

➢ No non-genuine or non-compliant activities

➢ Application must contain complete and correct information

➢ Application must be filed within prescribed timelines in case of changes to objects or upon commencement of activities

♦ Mode of Filing and Verification – Forms must be submitted electronically. If return filing is by DSC, forms must also be submitted with DSC; otherwise, EVC may be used. The form must be verified by a person authorised under Section 140.

♦ Cancellation of Trust Registration under Section 12AB

The exemption under Sections 11 and 12 is available only if the trust or institution holds valid registration under Section 12AB. The Principal Commissioner or Commissioner may cancel such registration under the provisions of Section 12AB(4)/(5).

♦ Scope of Cancellation – The following registrations may be cancelled:

➢ Final or provisional registration under Section 12AB(1)(a)/(b)/(c)

➢ Final registration under Section 12AA(1)(b)

♦ Circumstances for Cancellation – Registration may be cancelled upon:

➢ Suo moto notice by PCIT/CIT on observing a specified violation

➢ Reference from the Assessing Officer

➢ Case selection under Risk Management Strategy as per Section 135A

♦ Specified Violations Include

➢ Application of income not aligned with the trust’s objects

➢ Income from non-incidental business activities

➢ Non-maintenance of separate books for incidental business

➢ Income applied for private religious purposes or a particular religious community/caste

➢ Non-genuine activities or non-compliance with registration conditions

➢ Non-compliance with applicable laws, confirmed by final order or decree

➢ Furnishing false or incorrect information in the application for registration

Note: As per the amendment by the Finance Act, 2025 (w.e.f. 01-04-2025), incomplete applications will not be treated as specified violations. However, applications containing false or incorrect information will still attract cancellation proceedings.

♦ Procedure for Cancellation

➢ PCIT/CIT may call for documents or make inquiries to verify the violation

➢ An order shall be passed in writing, either cancelling or refusing to cancel registration, after providing an opportunity of being heard

➢ Order to be forwarded to the Assessing Officer and the concerned trust/institution

♦ Timeline for Passing Cancellation Order—The cancellation order must be passed within 6 months from the end of the quarter in which the first notice is served.

♦ Consequences of Cancellation

➢ Loss of exemption under Sections 11 and 12

➢ Computation of Income under normal provisions

➢ Cancellation of approval under Section 80G

➢ Accreted income taxed under Section 115TD

♦ Accumulation of Income by Trust

A trust registered under Section 12AA or Section 12AB must apply at least 85% of its income for charitable or religious purposes in India. If not applied, the income can still be considered as applied under specific provisions, provided prescribed declarations are submitted and the funds are invested in modes specified under Section 11(5). Failure to utilise such accumulated income within permitted timelines or for approved purposes may result in withdrawal of the exemption.

♦ Modes of Accumulation

➢ Statutory Accumulation: Up to 15% of income can be accumulated indefinitely without conditions.

➢ 5-Year Accumulation [Section 11(2)]: Shortfall from the 85% application requirement can be accumulated for up to 5 years if Form 10 is filed at least two months prior to the due date of return filing under Section 139(1).

➢ Deemed Application [Section 11(1), Explanation 1(2)]: If income cannot be applied due to non-receipt or other reasons, it may be deemed to be applied if Form 9A is filed at least two months prior to the due date under Section 139(1).

Note: CBDT Circular No. 6/2023, dated 24-5-2023, clarified that the benefit of deemed application and Accumulation shall be available if Form 9A and 10 are submitted on or before the due date for filing the return under Section 139(1).

♦ Conditions for Accumulated Income – Accumulated income must:

➢ Be invested in modes specified under Section 11(5); and

➢ Be applied only for the purposes for which it was accumulated.

Use for any other purpose, or non-utilisation, results in the withdrawal of the exemption, and such income becomes taxable under Section 115BBI.

♦ Utilisation in Exceptional Cases [Section 11(3A)] – If accumulated income cannot be applied as planned due to reasons beyond control, the Assessing Officer may permit application for other aligned purposes within the trust’s objects. However, such amounts cannot be credited or paid to any other trust/institution (including those under Section 10(23C)), unless in the year of dissolution.

♦ Taxation of Accumulated Income [Section 11(3)] – Accumulated income shall be deemed to be income and taxed under Section 115BBI in the following cases:

➢ Applied for purposes other than charitable/religious;

➢ Ceases to remain invested in Section 11(5) modes;

➢ Not utilised within the permitted 5-year period;

➢ Credited or paid to any other trust or institution (registered under Section 12AA/12AB or approved under Section 10(23C)(iv)-(via)).

♦ Maintenance of Books of Account and Other Documents by Trust or Institution

A trust or institution claiming exemption under Section 11/12 or Section 10(23C) must maintain prescribed books of account and specified records, including those related to contributions, income application, donations, investments, borrowings, specified persons, and projects. These records must be preserved at the registered office for 10 years.

As per Rule 17AA , the following records must be maintained by trusts or institutions registered under Section 12AB or approved under Section 10(23C):

♦ Books of Account to be Maintained

➢ Cash book, ledger, journal

➢ Serially numbered bills and receipts issued and received

➢ Any other book necessary to provide a true and fair view of affairs

These are also required for business undertakings under Section 11(4).

♦ Records of Contributions – Trusts must maintain detailed records of all contributions, including corpus donations and funds for renovation of notified religious places. Required details:

➢ Name, address, PAN and Aadhaar (if available) of the donor

♦ Records of Income Application – Records must detail application of income in India/outside India, deemed applications, and corpus utilisation. Required information includes:

➢ Amount, recipient details, purpose of application

➢ Additional records for application out of accumulation and deemed application

♦ Records of Donations Made – Details of amounts paid to other registered/approved institutions must be maintained, along with:

➢ Name, address, and PAN of the recipient

➢ Purpose of donation

♦ Records of Investments and Deposits – Investments made from current income, accumulated funds, corpus, or specific donations must be tracked. Separate records are required for amounts invested in permissible and non-permissible modes under Section 11(5).

♦ Records of Income Accumulation – Details of the purpose and period for which income is accumulated must be recorded when 85% of the income is not applied during the year.

♦ Records of Loans and Borrowings – Details must include amount, dates, lender information, repayment status, and application of such funds in current or earlier years.

♦ Records of Properties – Separate documentation is required for:

➢ Immovable properties (type, address, acquisition cost, registration, transfer details, reinvestment of net consideration)

➢ Movable properties (type and acquisition cost)

♦ Records of Specified Persons [Section 13(3)] – To prevent exemption withdrawal, records must detail:

➢ Identity and transactions with specified persons

➢ Evidence that no undue benefit was conferred

♦ Records of Income and Projects – Must include:

➢ Income from property and other sources

➢ Name, address, and objective of each project or institution run by the trust

♦ Form and Place of Maintenance – Books may be kept in written, electronic, or digital form (including printouts or electromagnetic storage). They must be kept at the registered office or another place in India after passing a board resolution and notifying the Assessing Officer within 7 days.

♦ Retention Period – Books must be preserved for 10 years from the end of the relevant assessment year. If the assessment is reopened under Section 147, records must be retained until finalisation.

♦ Filing of Audit Reports by Trusts or Institutions in Form 10B or Form 10BB

To claim exemption under Sections 11 and 12 or Section 10(23C), trusts and institutions registered under Section 12AB or approved under Section 10(23C) must get their accounts audited if their income exceeds the basic exemption limit. The audit report must be submitted in Form 10B or Form 10BB , depending on specified conditions.

♦ Deadline to file Audit Report – The audit report must be furnished at least one month prior to the due date of filing the return of income under Section 139(1).

♦ Form 10B – When Applicable – Trusts or institutions must file Form 10B if any of the following conditions are satisfied:

➢ Total income (before claiming exemption under Sections 11, 12, or Section 10(23C)(iv), (v), (vi), (via)) exceeds Rs. 5 crore during the previous year;

➢ Foreign contribution has been received during the previous year;

➢ Any part of the income has been applied outside India.

♦ Form 10BB – When Applicable – Form 10BB must be filed where all the following conditions are met:

➢ Total income (before exemptions under Sections 11, 12, or Section 10(23C)(iv), (v), (vi), (via)) is up to Rs. 5 crore;

➢ No foreign contribution was received during the previous year;

➢ No part of the income is applied outside India.

♦ Filing of Income Tax Return by Trusts or Institutions

The trusts or institutions registered under Section 12AB are required to file a return of income under Section 139(4A) if the total income, without giving effect to the provisions of Sections 11 and 12, exceeds the maximum amount that is not chargeable to Income-tax. The return of income is to be filed within the time allowed under Section 139(1) or Section 139(4).

♦ Statutory Forms of Investment or Deposit under Section 11(5)

Section 11(5) specifies the permissible modes of investment or deposit for funds held by trusts or institutions claiming income-tax exemption under various provisions. The objective is to ensure safe and regulated deployment of unutilised income until it is applied for charitable or religious purposes.

♦ Applicability – The following entities must invest or deposit their income in the prescribed modes until utilisation:

➢ Research associations [Section 10(21)]

➢ Employee welfare funds [Section 10(23AAA)]

➢ Institutions approved under Section 10(23C)

➢ Charitable or religious trusts claiming exemption under Sections 11 and 12

♦ Funds Required to be Invested in Permissible Modes

➢ Voluntary contributions (including corpus)

➢ Corpus contributions for renovation/repair of notified religious places

➢ Accumulated income under Section 11(2)

♦ Permissible Modes of Investment or Deposit – The funds must be parked in any of the following:

➢ Immovable Property

➢ Government Savings Certificates

➢ Post Office Savings Bank Deposits

➢ Bank Accounts with Scheduled or Cooperative Banks

➢ Units of UTI or Other Mutual Funds

➢ Central/State Government Securities

➢ Debentures of any Corporate Body Guaranteed by the Central or State Government

➢ Deposits in Public Sector Companies

➢ Bonds eligible under Sections 36(1)(vii) or 36(1)(viii)

➢ Deposits with IDBI

➢ Deposits or Investments with Urban Infrastructure Finance Companies

➢ Public Account of India

➢ Authorities established for Housing or Urban Development

➢ Equity Shares of Depositories or Incubatees

➢ Certain Securities by a Recognised Stock Exchange

➢ Shares of National Skill Development Corporation

➢ Debt Instruments of RBI-registered Infrastructure Finance Companies

➢ Sovereign Gold Bonds

➢ Equity or Bonds of Approved Digital Payment Companies or ONDC Ltd.

➢ Units of POWERGRID Infrastructure Investment Trust

♦ Consequences of Non-Compliance

➢ For trusts registered under Section 12AB or approved under Section 10(23C), failure to invest or deposit income in the prescribed modes renders such income taxable under Section 115BBI.

➢ For other entities under Sections 10(21) or 10(23AAA), exemption is denied if investments are not in permissible forms.

♦ Benefit to Interested Person by a Charitable or Religious Trust

No exemption under sections 11 or 12 shall be available to a charitable or religious trust or institution to the extent its income is applied, directly or indirectly, for the benefit of any interested person.

♦ Circumstances Affecting Exemption – Section 13 provides that the exemption under sections 11 or 12 is withdrawn to the extent that income:

➢ Enures directly or indirectly for the benefit of an interested person; or

➢ Is used or applied for the benefit of such person during the previous year.

Only the amount so applied or used is denied exemption; the remaining income retains its eligibility.

♦ Definition of Interested Person [Section 13(3)] – The term includes:

➢ The author or founder of the trust/institution;

➢ A person contributing over Rs. 1 lakh in the previous year or over Rs. 10 lakh in aggregate (termed as “substantial contributor”);

➢ Where the above is a Hindu Undivided Family (HUF), its members;

➢ Any trustee, manager, or their relatives;

➢ Any concern in which the aforementioned persons (excluding substantial contributors) have a substantial interest.

♦ Meaning of Relative – Relatives include spouse, siblings (and their spouses), lineal ascendants or descendants (and their spouses), and certain other close family members.

♦ Meaning of Substantial Interest – A person is deemed to have substantial interest in a concern if, alone or with relatives:

➢ Holds at least 20% of equity share capital (in case of a company), or

➢ Is entitled to at least 20% of profits (in case of other concerns).

♦ Situations Deemed as Benefit to an Interested Person – Income or property of a trust/institution shall be deemed to be applied for the benefit of an interested person in the following cases:

➢ Loan without adequate interest or security

➢ Use of property without adequate rent

➢ Payment of unreasonable salary or allowance

➢ Provision of services without adequate remuneration

➢ Purchase of assets from interested persons for more than adequate consideration

➢ Sale of assets to interested persons for less than adequate consideration

➢ Diversion of income/property exceeding Rs. 1,000 in aggregate

➢ Investment in concerns with substantial interest of the interested person

In the last case, if the aggregate investment does not exceed 5% of the capital of the concern, the exemption is denied only on the income arising from such investment and not the entire income of the trust.

Computation of Income under Section 12AB

Income derived from property held under trust for charitable or religious purposes is exempt if applied in India for such purposes. Expenditure can be revenue or capital, but must align with the trust’s objects. Certain conditions, disallowances, and exceptions apply.

♦ Manner of Computation

• Income is computed on a commercial basis.
• Voluntary contributions (excluding corpus donations) are treated as income.
• Corpus donations are exempt only if invested in modes specified under Section 11(5).
• Anonymous donations are taxed at 30% plus applicable surcharge and cess.
• Exempt income under other provisions of Section 10 is not allowed except Sections 10(1), 10(23C), 10(23EA/EC/ED), 10(46/46A/46B), provided registration under Section 12AB is inoperative.

♦ Income from Business

• Income from a business held as property under trust is exempt under Section 11(4).
• Business incidental to objectives is exempt under Section 11(4A), provided separate books are maintained and the activity supports charitable objects.

♦ Application of Income

• Includes all expenses incurred for charitable/religious purposes, whether capital or revenue in nature.
• Application is allowed only on an actual payment basis.

♦ Specific Application Scenario

• Out of Corpus: Application not allowed unless corpus is restored within 5 years by reinvestment in Section 11(5) modes; subject to other prescribed conditions.
• Out of Loans/Borrowings: Application allowed only when repaid out of income within 5 years.
• Donations to Other Trusts: Only 85% of donations to other registered trusts are considered applications; corpus donations and donations from accumulated income are excluded.
• Capital Gains: Exempt if the entire sale consideration is reinvested in a new capital asset.
• Interest-Bearing Loans for Education: Allowed as an application if aligned with the trust’s objectives.
• International Welfare: Allowed only if the trust was created before 01-04-1952 or is notified by the CBDT.

Accumulation of Income

• 15% of income can be accumulated without restriction.
• Additional accumulation for up to 5 years permitted via Form 10 (filed at least two months prior to the due date under Section 139(1)).
• Income deemed applied (due to non-receipt or other reasons) via Form 9A is allowed if filed at least two months prior to the due date.
• CBDT Circular No. 6/2023, dated 24-5-2023, clarified that the benefit of deemed application and accumulation shall be available if Form 9A and 10 are submitted on or before the due date for filing the return under Section 139(1).
• Unutilised accumulated income beyond 5 years is taxable under Section 115BBI.

Disallowances and Invalid Applications

• Depreciation is not allowed if the cost was already claimed as an application.
• 30% disallowance on expenses without TDS deduction [Section 40(a)(ia)].
• Cash expenses exceeding Rs. 10,000 are disallowed.
• Donations forming a corpus of donee-trusts are not treated as an application.
• Application outside India is not allowed unless CBDT grants approval under Section 11(1)(c).
• Excess application in prior years cannot be carried forward.

Withdrawal of Exemption [Section 13]

Section 13 prescribes specific circumstances under which the exemption under Sections 11 and 12 shall not be available to a charitable or religious trust. These include violation of public benefit criteria, benefits to interested persons, investment in impermissible modes, and procedural defaults.

♦ Circumstances Leading to Withdrawal of Exemption

• Private Religious Purpose [Section 13(1)(a)] – Exemption is denied if the trust applies income to private religious purposes not for public benefit.
• Trust for Particular Religious Community or Caste [Section 13(1)(b)] – Charitable trusts benefiting a specific religious community or caste are not eligible. Exceptions include trusts for Scheduled Castes, Scheduled Tribes, backward classes, women, or children, and trusts created before 01-04-1962.
• Benefit to Interested Persons [Section 13(1)(c)] – Income applied for the benefit of specified persons leads to denial of exemption to that extent. Additional consequences include:

➢ Tax under Section 115BBI

➢ Penalty under Section 271AAE

➢ Taxability in the hands of beneficiary under Section 56(2)(x)

• Investment in Impermissible Modes [Section 13(1)(d)] – Exemption is denied to the extent funds are invested in non-specified modes. Exceptions include assets held prior to 01-06-1973, bonus shares, business profits with separate books, and assets converted into permissible modes within one year.
• Anonymous Donations [Section 13(7)] – Taxable portion of anonymous donations under Section 115BBC is not eligible for exemption. The non-taxable portion must satisfy the 85% application requirement.
• Violation of Proviso to Section 2(15) [Section 13(8)] – Where a trust advances an object of general public utility but crosses the 20% threshold of receipts from commercial activities, exemption is denied. Computation of income in such cases allows deduction of revenue expenditure incurred in India, subject to specific exclusions.
• Non-filing of Form 10 or Income-tax Return [Section 13(9)] – Failure to submit Form 10 and Income-tax return within the due date under Section 139(1) leads to denial of exemption for accumulated income under Section 11(2). However, no penal consequence arises if both are filed by the due date.
• Non-fulfilment of Conditions under Section 12A – Exemption under Sections 11 and 12 is denied if:

➢ Audit report is not obtained

➢ Books are not properly maintained

➢ Return is not filed within the prescribed time

• Computation of Taxable Income upon Withdrawal of Exemption
  • Permitted deductions – Revenue expenditure incurred in India for trust objects (with exclusions)
  • Non-permissible deductions:

➢ Capital expenditure

➢ Expenses in default of TDS [Section 40(a)(ia)]

➢ Cash payments [Sections 40A(3)/40A(3A)]

➢ Expenditure incurred outside India

• • Losses from disallowed expenses are not eligible for set-off under any provision.

Exclusivity of Section 11 and Section 10(23C)

Trusts cannot simultaneously claim exemption under Sections 12AB and 10(23C). They must opt for one at the time of seeking approval.

Anonymous Donations [Section 115BBC]

Anonymous donations are not eligible for exemption under Section 11, Section 12, or Section 10(23C). If the donee does not maintain records identifying the donor, the donation is taxed at 30% (plus applicable surcharge and cess).

♦ Meaning of Anonymous Donation

An anonymous donation is a voluntary contribution in which the recipient does not maintain records of the donor’s identity, including name, address, and other prescribed particulars.

♦ Threshold for Taxability

Anonymous donations are taxable only if the total exceeds the higher of:

• Rs. 1,00,000; or
• 5% of the total donations received.

Tax is levied only on the excess over the higher of these limits.

♦ Rate of Tax

Tax is levied at 30% (plus surcharge and cess) on the taxable portion of anonymous donations.

♦ Entities Liable for Tax on Anonymous Donations

The following entities are liable to pay tax under this provision:

• Trusts or institutions referred to in Section 11
• Educational institutions under Section 10(23C)(iiiad) and (vi) (not substantially financed by the Government)
• Medical institutions under Section 10(23C)(iiiae) and (via) (not substantially financed by the Government)
• Funds/institutions for charitable purposes notified under Section 10(23C)(iv)
• Religious and charitable trusts notified under Section 10(23C)(v)

♦ Exempt Entities

Anonymous donations received by the following entities are not taxable under this provision:

• Trusts or institutions established wholly for religious purposes
• Trusts or institutions established wholly for religious and charitable purposes, except where anonymous donations are received with a specific direction for any educational or medical institution run by such trust.

Merger of Trusts [Section 12AC]

Section 12AC provides for the merger of charitable trusts or institutions without incurring tax on accreted income, subject to specified conditions. This provision complements Section 115TD, which exempts accreted tax in case of mergers between registered or approved entities with similar objectives.

Section 12AC applies where:

• Both entities are registered under Section 12AAor Section 12AB, or approved under Section 10(23C)(iv), (v), (vi), or (via);
• Both entities have the same or similar charitable objectives; and
• Other prescribed conditions are fulfilled.

A merger that satisfies these requirements is exempt from accreted tax under Section 115TD.

Tax on Accreted Income [Section 115TD]

Specified trusts or institutions are liable to pay additional income-tax on accreted income when they convert into non-charitable entities, merge with ineligible entities, or fail to transfer assets upon dissolution. This tax, levied under Section 115TD, is in addition to regular income-tax and is charged at the maximum marginal rate.

♦ Applicability of Accreted Tax

These provisions apply to:

• Institutions approved under Section 10(23C);
• Trusts registered under Section 12Aor 12AB.

♦ Triggering Events for Accreted Tax

Accreted tax is levied when:

• The trust/institution is converted into a non-eligible form;
• It merges with an entity not having similar objects or lacking registration/approval;
• Upon dissolution, it fails to transfer assets to another registered or approved institution within 12 months.

♦ Deemed Conversion

Deemed conversion arises when:

• Registration or approval is cancelled;
• Objects are modified, and the entity fails to obtain fresh registration/approval;
• No application is made for re-registration, renewal, or conversion of provisional registration within the prescribed timelines.

Computation of Accreted Income

Accreted income = Aggregate Fair Market Value (FMV) of assets – Total liabilities

FMV is calculated as per Rule 17CB, ignoring:

• Prepaid taxes (net of refunds claimed);
• Non-representative assets (e.g., deferred expenditure);
• Assets acquired from agricultural income;
• Assets acquired before the effective date of registration if no exemption was availed under Sections 11, 12 , or 10(23C);
• Assets transferred to another registered institution.

Liabilities exclude capital/reserve funds, contingent liabilities, and tax provisions.

♦ Tax Rate and Additional Conditions

• Tax is levied at the maximum marginal rate.
• No deduction or credit is allowed against this tax.
• Payable even if the entity has no other taxable income.

♦ Time Limit for Tax Payment

Tax must be paid within 14 days from:

• Expiry of the appeal period or receipt of cancellation order;
• End of the previous year in case of modification without re-registration;
• End of the previous year, where no application is made for re-registration;
• Date of merger or expiry of 12-month period from dissolution.

♦ Interest on Late Payment [Section 115TE]

Interest at 1% per month or part thereof is levied for delay in payment from the due date till the date of actual payment.

♦ Assessee in Default [Section 115TF]

The following shall be deemed assessee in default:

• The specified trust or institution, including trustees or principal officer;
• Any non-charitable entity receiving assets upon dissolution (limited to asset value received).

Tax on Specified Income [Section 115BBI]

Section 115BBI of the Income-tax Act, 1961 prescribes a special tax rate for specified income of certain charitable and religious institutions. It mandates taxation at a flat rate of 30% plus applicable surcharge and cess on such income, irrespective of the general exemption provisions under Sections 10(23C) and 11.

♦ Applicability of Section 115BBI

The provision applies to the following entities:

• Funds or institutions under Section 10(23C)(iv) and (v);
• Universities or educational institutions under Section 10(23C)(vi);
• Hospitals or medical institutions under Section 10(23C)(via); and
• Trusts or institutions registered under Section 11.

Specified Income Taxable under Section 115BBI

The following incomes shall be taxed at the special rate:

• Income accumulated in excess of the 15% limit, which is not permitted under any specific provisions;
• Deemed income under Section 11(1B) not applied within the specified time;
• Income applied or ceased to be accumulated for non-charitable/religious purposes;
• Income applied for purposes not aligned with approved objects under Section 10(23C);
• Income ceasing to remain invested in forms specified under Section 11(5);
• Income not utilised within the 5-year accumulation period;
• Income credited or paid to another trust/institution registered or approved under Sections 12AA/12AB or 10(23C);
• Non-exempt income due to impermissible investments under Section 11(5);
• Income used for the benefit of interested persons, thereby losing exemption under Sections 10(23C) or 11/12;
• Income applied for charitable purposes outside India, thereby losing the exemption.

♦ Computation of Specified Income

In computing the specified income:

• No deduction shall be allowed for any expenditure, allowance, or loss under any provision of the Act.
• This restriction applies only to the computation of specified income; it does not affect other income.

♦ Tax Rate

• Specified income is taxed at 30% plus applicable surcharge and cess.
• Other income is taxed at rates applicable to the entity based on its nature and classification.

Approval of a Fund or Institution under Section 80G

Introduction

Section 80G provides a deduction to donors for contributions made to certain approved funds or institutions. The deduction is allowed only if the donee institution is approved by the Principal Commissioner or Commissioner and fulfils specific conditions, including filing statements and issuing donation certificates.

Conditions for Approval under Section 80G

To obtain or maintain approval, a fund or institution must:

• Be established in India for charitable purposes (excluding primarily religious purposes).
• Not be intended for the benefit of any particular religious community or caste, with specified exceptions (e.g., Scheduled Castes, women and children).
• Have income exempt under Sections 11, 12, 10(23AA), or 10(23C). Business income is permitted if separate accounts are maintained and donations are not used for such business.
• Apply income and assets only for charitable purposes.
• Maintain regular books of account.
• Be constituted or registered under applicable laws (e.g., trust, society, Section 8company, university).
• Be approved by the income tax authority.
• File donation statement in Form 10BD and issue donation certificates in Form 10BE.

Statement of Donation ( Form 10BD )

• Furnished electronically (via DSC or EVC) by 31st May of the following financial year.
• Verified by an authorized person.
• Correction statements may be filed.
• Failure to file attracts a fee under Section 234Gand a penalty under Section 271K.

Certificate of Donation (Form 10BE)

• Issued to each donor by 31st May of the following financial year.
• Specifies donation amount for the year.
• Failure to issue the certificate also attracts a fee under Section 234Gand a penalty under Section 271K.

Application for Approval

• Applications for approval or re-approval must be filed in Form 10A or Form 10AB , depending on the nature of the applicant and timing.

Time limits vary, including:

• Re-approval of Existing Approval: By 30-06-2024 for institutions already approved as of 01-04-2021 (Circular No. 7/2024).
• Renewal of Approval: At least 6 months before expiry for re-approval.
• Conversion of Provisional Approval to Regular Approval: Within 6 months of the commencement of activities or 6 months before the expiry of the provisional approval.
• Provisional Approval: At least 1 month before the start of the relevant previous year for new applicants seeking provisional approval. For entities that have not commenced their activities.
• Direct Regular Approval: At any time after the commencement of activities for direct regular approval, where activities have commenced.

Order for Approval

• Approval is generally granted for 5 years.
• Provisional approvals are valid for 3 years.
• Orders must be passed within prescribed timelines (e.g., 6 months from the end of the relevant quarter in which the application is received). In case of provisional approval, the order shall be passed within 1 month from the end of the month in which the application was received.

Inquiry and Rejection

The Principal Commissioner or Commissioner may call for documents and conduct inquiries. If not satisfied with the genuineness of activities or compliance with conditions, approval may be rejected after providing a reasonable opportunity of being heard.

Form for Approval of Trust or Institution under Section 80G

To claim a deduction under Section 80G, donors must contribute to a fund or institution approved by the Principal Commissioner or Commissioner. Approval is granted through Form 10A (provisional approval) or Form 10AB (conversion, renewal, or direct approval), which must be filed electronically with the prescribed authorities.

♦ Applicability of Forms

• Form 10A is used for:

➢ Re-approval of existing institutions approved before 01-04-2021.

➢ Provisional approval for new institutions (only if activities haven’t commenced).

• Form 10AB is used for:

➢ Renewal of approval for institutions under the new regime.

➢ Conversion of provisional approval into regular approval.

➢ Direct approval post commencement of activities.

• Filing Authority and Procedure
  • The prescribed authority authorised by the CBDT is the Principal Commissioner or Commissioner.
  • On receipt of Form 10A , approval is granted in Form 10AC with a 16-digit Unique Registration Number (URN).
  • Incorrect or false information in Form 10A may lead to cancellation of approval after due opportunity of being heard.
  • On receipt of Form 10AB , approval is granted in Form 10AD with a 16-digit Unique Registration Number (URN).

Documents to be Furnished

• For Form 10A :

➢ Self-certified copy of the instrument or document of creation or establishment.

➢ Self-certified copy of registration certificates with relevant authorities.

➢ Self-certified copy of the order of earlier registration, if any. (for re-approval)

➢ Self-certified copies of annual accounts (up to 3 years immediately preceding the year in which the said application is made), if applicable.

➢ Self-certified affidavit (if no prior approval).

➢ Self-certified copy of the rejection order of the application for grant of registration under Section 80G, if any (for provisional approval)

• For Form 10AB : All documents listed above, plus:

➢ Audit reports and accounts of the business undertaking (for trusts with business income).

➢ Self-certified copy of the documents evidencing adoption or modification of the objects.

➢ Notes on activities and objects.

Conditions for Re-approval Cases- Re-approval orders (Form 10AC or 10AD ) are passed subject to conditions such as:

• • No cancellation order under Sections 12AB(4), under the fifteenth proviso to 10(23C), or as per Rule 2C or Rule 17A.
  • Timely and complete (true and correct) filing of application.
  • Where the institution is approved and the approval period is due to expire, such institution has applied for approval at least 6 months before the expiry.

Conditions for provisional approval – Order forProvisional approval ( Form 10AC or 10AD ) are passed subject to conditions such as:

• • No cancellation order under Sections 12AB(4), under the fifteenth proviso to 10(23C), or as per Rule 2C or Rule 17A.
  • Timely and complete (true and correct) filing of application.
  • Institutions with provisional approval must apply for regular approval within 6 months of activity commencement or 6 months before expiry, whichever is earlier.

♦ Verification and Filing Mode

• Applications must be filed electronically with a Digital Signature Certificate (DSC) or through an Electronic Verification Code (EVC), as applicable.
• The person authorised under Section 140 of the Income Tax Act must verify the application.

Income-tax Act, 1961

Section – 2

Definitions.

2. In this Act, unless the context otherwise requires,—

(1) “advance tax” means the advance tax payable in accordance with the provisions of Chapter XVII-C;

(1A) “agricultural income” means—

(a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;

(b) any income derived from such land by—

(i) agriculture; or

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause;

(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :

Provided that—

(i) the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and

(ii) the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated—

(A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand; or

(B) in any area within the distance, measured aerially,—

(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or

(II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than one lakh but not exceeding ten lakh; or

(III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh.

Explanation 1.—For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section. Explanation 2.—For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under sub-clause (a) or sub-clause (b) shall not be agricultural income.

Explanation 3.—For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.

Explanation 4.—For the purposes of clause (ii) of the proviso to sub-clause (c), “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

(1B) “amalgamation”, in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that—

(i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation;

(ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation;

(iii) shareholders holding not less than three-fourths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation,

otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first-mentioned company;

(1C) “Additional Commissioner” means a person appointed to be an Additional Commissioner of Income-tax under sub-section (1) of section 117;

(1D) “Additional Director” means a person appointed to be an Additional Director of Income-tax under sub-section (1) of section 117;

(2) “annual value”, in relation to any property, means its annual value as determined under section 23;

(3) [***]

(4) “Appellate Tribunal” means the Appellate Tribunal constituted under section 252 ;

(5) “approved gratuity fund” means a gratuity fund which has been and continues to be approved by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part C of the Fourth Schedule ;

(6) “approved superannuation fund” means a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part B of the Fourth Schedule ;

(7) “assessee” means a person by whom any tax or any other sum of money is payable under this Act, and includes—

(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person ;

(b) every person who is deemed to be an assessee under any provision of this Act ;

(c) every person who is deemed to be an assessee in default under any provision of this Act ;

(7A) “Assessing Officer” means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;

(8) “assessment” includes reassessment ;

(9) “assessment year” means the period of twelve months commencing on the 1st day of April every year ;

(9A) “Assistant Commissioner” means a person appointed to be an Assistant Commissioner of Income-tax or a Deputy Commissioner of Income-tax under sub-section (1) of section 117 ;

(9B) “Assistant Director” means a person appointed to be an Assistant Director of Income-tax under sub-section (1) of section 117 ;

(10) “average rate of income-tax” means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income ;

(11) “block of assets” means a group of assets falling within a class of assets comprising—

(12) tangible assets, being buildings, machinery, plant or furniture ;

(12A) intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, not being goodwill of a business or profession, in respect of which the same percentage of depreciation is prescribed ;

(12) “Board” means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) ;

(12A) “books or books of account” includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or in electronic form or in digital form or as print-outs of data stored in such electronic form or in digital form or in a floppy, disc, tape or any other form of electro­magnetic data storage device;

(13) “business” includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;

(13A) “business trust” means a trust registered as,—

(i) an Infrastructure Investment Trust under the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or

(ii) a Real Estate Investment Trust under the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992),

(14) “capital asset” means—

(a) property of any kind held by an assessee, whether or not connected with his business or profession;

(b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);

Following sub-clause (b) shall be substituted for existing sub-clause (b) of clause (14) of section 2 by the Finance Act, 2025, w.e.f. 1-4-2026:

(b) any securities held by—

(i) a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or

(ii) an investment fund specified in clause (a) of Explanation 1 to section 115UB which has invested such securities in accordance with the provisions of the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or under the International Financial Services Centres Authority Act, 2019 (50 of 2019);

(c) any unit linked insurance policy to which exemption under clause (10D) of section 10 does not apply [on account of the applicability of the fourth and fifth provisos thereof], but does not include—

(i) any stock-in-trade [other than the securities referred to in sub-clause (b)], consumable stores or raw materials held for the purposes of his business or profession ;

(ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes—

(a) jewellery;

(b) archaeological collections;

(c) drawings;

(d) paintings;

(e) sculptures; or

(f) any work of art.

Explanation.—For the purposes of this sub-clause, “jewellery” includes—

(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;

(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;

(iii) agricultural land in India, not being land situate—

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or

(b) in any area within the distance, measured aerially,—

(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or

(II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or

(III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.

Explanation.—For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

(iv) 6¹/₂ per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government;

(v) Special Bearer Bonds, 1991, issued by the Central Government ;

(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015 notified by the Central Government.

Explanation 1.—For the removal of doubts, it is hereby clarified that “property” includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.

Explanation 2.—For the purposes of this clause—

(a) the expression “Foreign Institutional Investor” shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD;

(b) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(15) “charitable purpose” includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless—

(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

(ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;

(15A) “Chief Commissioner” means a person appointed to be a Chief Commissioner of Income-tax or a Director General of Income-tax or a Principal Chief Commissioner of Income-tax or a Principal Director General of Income-tax under sub-section (1) of section 117;

(15B) “child”, in relation to an individual, includes a step-child and an adopted child of that individual;

(16) “Commissioner” means a person appointed to be a Commissioner of Income-tax or a Director of Income-tax or a Principal Commissioner of Income-tax or a Principal Director of Income-tax under sub-section (1) of section 117;

(16A) “Commissioner (Appeals)” means a person appointed to be a Commissioner of Income-tax (Appeals) under sub-section (1) of section 117 ;

(17) “company” means—

(i) any Indian company, or

(ii) any body corporate incorporated by or under the laws of a country outside India, or

(iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922) or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or

(iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company :

Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971 or on or after that date) as may be specified in the declaration ;

(18) “company in which the public are substantially interested”—a company is said to be a company in which the public are substantially interested—

(a) if it is a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank ; or

(aa) if it is a company which is registered under section 25 of the Companies Act, 1956 (1 of 1956) ; or

(ab) if it is a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, it is declared by order of the Board to be a company in which the public are substantially interested :

Provided that such company shall be deemed to be a company in which the public are substantially interested only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration ; or

(ac) if it is a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit Society ; or

(ad) if it is a company, wherein shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies ;

(b) if it is a company which is not a private company as defined in the Companies Act, 1956 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely :—

(A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder ;

(B) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by—

(a) the Government, or

(b) a corporation established by a Central, State or Provincial Act, or

(c) any company to which this clause applies or any subsidiary company of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year.

Explanation.—In its application to an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, item (B) shall have effect as if for the words “not less than fifty per cent”, the words “not less than forty per cent” had been substituted ;

(19) “co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies ;

(19A) “Deputy Commissioner” means a person appointed to be a Deputy Commissioner of Income-tax under sub-section (1) of section 117 ;

(19AA) “demerger”, in relation to companies, means the transfer, pursuant to a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 (1 of 1956), by a demerged company of its one or more undertakings to any resulting company in such a manner that—

(i) all the property of the undertaking, being transferred by the demerged company, immediately before the demerger, becomes the property of the resulting company by virtue of the demerger;

(ii) all the liabilities relatable to the undertaking, being transferred by the demerged company, immediately before the demerger, become the liabilities of the resulting company by virtue of the demerger;

(iii) the property and the liabilities of the undertaking or undertakings being transferred by the demerged company are transferred at values appearing in its books of account immediately before the demerger:

Provided that the provisions of this sub-clause shall not apply where the resulting company records the value of the property and the liabilities of the undertaking or undertakings at a value different from the value appearing in the books of account of the demerged company, immediately before the demerger, in compliance to the Indian Accounting Standards specified in Annexure to the Companies (Indian Accounting Standards) Rules, 2015;

(iv) the resulting company issues, in consideration of the demerger, its shares to the shareholders of the demerged company on a proportionate basis except where the resulting company itself is a shareholder of the demerged company;

(v) the shareholders holding not less than three-fourths in value of the shares in the demerged company (other than shares already held therein immediately before the demerger, or by a nominee for, the resulting company or, its subsidiary) become share-holders of the resulting company or companies by virtue of the demerger, otherwise than as a result of the acquisition of the property or assets of the demerged company or any undertaking thereof by the resulting company;

(vi) the transfer of the undertaking is on a going concern basis;

(vii) the demerger is in accordance with the conditions, if any, notified under sub-section (5) of section 72A by the Central Government in this behalf.

Explanation 1.—For the purposes of this clause, “undertaking” shall include any part of an undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity.

Explanation 2.—For the purposes of this clause, the liabilities referred to in sub-clause (ii), shall include—

(a) the liabilities which arise out of the activities or operations of the undertaking;

(b) the specific loans or borrowings (including debentures) raised, incurred and utilised solely for the activities or operations of the undertaking; and

(c) in cases, other than those referred to in clause (a) or clause (b), so much of the amounts of general or multipurpose borrowings, if any, of the demerged company as stand in the same proportion which the value of the assets transferred in a demerger bears to the total value of the assets of such demerged company immediately before the demerger.

Explanation 3.—For determining the value of the property referred to in sub-clause (iii), any change in the value of assets consequent to their revaluation shall be ignored.

Explanation 4.—For the purposes of this clause, the splitting up or the reconstruction of any authority or a body constituted or established under a Central, State or Provincial Act, or a local authority or a public sector company, into separate authorities or bodies or local authorities or companies, as the case may be, shall be deemed to be a demerger if such split up or reconstruction fulfils such conditions as may be notified in the Official Gazette, by the Central Government.

Explanation 5.—For the purposes of this clause, the reconstruction or splitting up of a company, which ceased to be a public sector company as a result of transfer of its shares by the Central Government, into separate companies, shall be deemed to be a demerger, if such reconstruction or splitting up has been made to give effect to any condition attached to the said transfer of shares and also fulfils such other conditions as may be notified by the Central Government in the Official Gazette.

Explanation 6.—For the purposes of this clause, the reconstruction or splitting up of a public sector company into separate companies shall be deemed to be a demerger, if such reconstruction or splitting up has been made to transfer any asset of the demerged company to the resulting company and the resulting company—

(i) is a public sector company on the appointed day indicated in such scheme, as may be approved by the Central Government or any other body authorised under the provisions of the Companies Act, 2013 (18 of 2013) or any other law for the time being in force governing such public sector companies in this behalf; and

(ii) fulfils such other conditions as may be notified by the Central Government in the Official Gazette in this behalf; (19AAA) “demerged company” means the company whose undertaking is transferred, pursuant to a demerger, to a resulting company;

(19B) “Deputy Commissioner (Appeals)” means a person appointed to be a Deputy Commissioner of Income-tax (Appeals) [***] under sub-section (1) of section 117 ;

(19C) “Deputy Director” means a person appointed to be a Deputy Director of Income-tax under sub-section (1) of section 117 ;

(20) “director”, “manager” and “managing agent”, in relation to a company, have the meanings respectively assigned to them in the Companies Act, 1956 (1 of 1956) ;

(21) “Director General or Director” means a person appointed to be a Director General of Income-tax or a Principal Director General of Income-tax or, as the case may be, a Director of Income-tax or a Principal Director of Income-tax, under sub-section (1) of section 117, and includes a person appointed under that sub-section to be an Additional Director of Income-tax or a Joint Director of Income-tax or an Assistant Director or Deputy Director of Income-tax;

(22) “dividend” includes—

(a) any distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company ;

(b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits, whether capitalised or not ;

(c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not ;

(d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not ;

(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits;

²[(f) any payment by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 68 of the Companies Act, 2013 (18 of 2013);]  but “dividend” does not include—

(i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ;

(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, and before the 1st day of April, 1965;

(ii) any advance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ;

[(iia) any advance or loan between two group entities, where,—

(A) one of the group entity is a “Finance company” or a “Finance unit”; and

(B) the parent entity or principal entity of such group is listed on stock exchange in a country or territory outside India other than the country or territory outside India as may be specified by the Board in this behalf;]

(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off;

(iv) [***]

(v) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company).

Explanation 1.—The expression “accumulated profits”, wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956.

Explanation 2.—The expression “accumulated profits” in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place.

Explanation 2A.—In the case of an amalgamated company, the accumulated profits, whether capitalised or not, or loss, as the case may be, shall be increased by the accumulated profits, whether capitalised or not, of the amalgamating company on the date of amalgamation.

Explanation 3.—For the purposes of this clause,—

(a) “concern” means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company ;

(b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern ;

⁵[(c) “Finance Company” and “Finance Unit” shall have the same meaning as assigned respectively to them in clauses (e) and (f) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Finance Company) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019):

Provided that such Finance Company or Finance Unit, is set up as a global or regional corporate treasury centre for undertaking treasury activities or treasury services as per the relevant regulations made by the International Financial Services Centres Authority established under section 4 of the said Act;

(d) “group entity”, “parent entity” and “principal entity” shall be such entities which satisfy such conditions as prescribed in this behalf;]

(22A) “domestic company” means an Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income ;

(22AA) “document” includes an electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(22AAA) “electoral trust” means a trust so approved by the Board in accordance with the scheme made in this regard by the Central Government;

(22B) “fair market value”, in relation to a capital asset, means—

(i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date ; and

(ii) where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act ;

(23) (i) “firm” shall have the meaning assigned to it in the Indian Partnership Act, 1932 (9 of 1932), and shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008 (6 of 2009);

(ii) “partner” shall have the meaning assigned to it in the Indian Partnership Act, 1932 (9 of 1932), and shall include,—

(a) any person who, being a minor, has been admitted to the benefits of partnership; and

(b) a partner of a limited liability partnership as defined in the Limited Liability Partnership Act, 2008 (6 of 2009);

(iii) “partnership” shall have the meaning assigned to it in the Indian Partnership Act, 1932 (9 of 1932), and shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008 (6 of 2009);

(23A) “foreign company” means a company which is not a domestic company;

(23B) “fringe benefits” means any fringe benefits referred to in section 115WB;

(23C) “hearing” includes communication of data and documents through electronic mode;

(24) “income” includes—

(i) profits and gains ;

(ii) dividend ;

(iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via) of clause (23C) of section 10 or by an electoral trust.

Explanation.—For the purposes of this sub-clause, “trust” includes any other legal obligation ;

(iii) the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17 ;

(iiia) any special allowance or benefit, other than perquisite included under sub-clause (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit ;

(iiib) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living ;

(iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ;

(iva) the value of any benefit or perquisite, whether convertible into money or not, obtained by any representative assessee mentioned in clause (iii) or clause (iv) of sub-section (1) of section 160 or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such person being hereafter in this sub-clause referred to as the “beneficiary”) and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary ;

(v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59 ;

(va) any sum chargeable to income-tax under clause (iiia) of section 28;

(vb) any sum chargeable to income-tax under clause (iiib) of section 28;

(vc) any sum chargeable to income-tax under clause (iiic) of section 28;

(vd) the value of any benefit or perquisite taxable under clause (iv) of section 28 ;

(ve) any sum chargeable to income-tax under clause (v) of section 28;

(vi) any capital gains chargeable under section 45 ;

(vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule ;

(viia) the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members;

(viii) [Omitted by the Finance Act, 1988, w.e.f. 1-4-1988. Original sub-clause (viii) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964;]

(ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.

Explanation.—For the purposes of this sub-clause,—

(i) “lottery” includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called;

(ii) “card game and other game of any sort” includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game ;

(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees’ State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ;

(xi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.

Explanation.—For the purposes of this clause, the expression “Keyman insurance policy” shall have the meaning assigned to it in the Explanation to clause (10D) of section 10 ;

(xii) any sum referred to in clause (va) of section 28;

(xiia) the fair market value of inventory referred to in clause (via) of section 28;

(xiii) any sum referred to in clause (v) of sub-section (2) of section 56;

(xiv) any sum referred to in clause (vi) of sub-section (2) of section 56;

(xv) any sum of money or value of property referred to in clause (vii) or clause (viia) of sub-section (2) of section 56;

(xvi) any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of sub-section (2) of section 56;

(xvii) any sum of money referred to in clause (ix) of sub-section (2) of section 56;

(xviia) any sum of money or value of property referred to in clause (x) of sub-section (2) of section 56;

(xviib) any compensation or other payment referred to in clause (xi) of sub-section (2) of section 56;

⁶[(xviic) any sum referred to in clause (xii) of sub-section (2) of section 56;

(xviid) any sum referred to in clause (xiii) of sub-section (2) of section 56;]

(xviii) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee other than,—

(a) the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43; or

(b) the subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be;

(25) “Income-tax Officer” means a person appointed to be an Income-tax Officer under section 117 ;

(25A) “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters;

(26) “Indian company” means a company formed and registered under the Companies Act, 1956 (1 of 1956), and includes—

(i) a company formed and registered under any law relating to companies formerly in force in any part of India (other than the State of Jammu and Kashmir and the Union territories specified in sub-clause (iii) of this clause) ;

(ia) a corporation established by or under a Central, State or Provincial Act ;

(ib) any institution, association or body which is declared by the Board to be a company under clause (17) ;

(ii) in the case of the State of Jammu and Kashmir, a company formed and registered under any law for the time being in force in that State ;

(iii) in the case of any of the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry, a company formed and registered under any law for the time being in force in that Union territory :

Provided that the registered or, as the case may be, principal office of the company, corporation, institution, association or body in all cases is in India ;

(26A) “infrastructure capital company” means such company which makes investments by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or sub-section (1) of section 80-IAB or an undertaking developing and building a housing project referred to in sub-section (10) of section 80-IB or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;

(26B) “infrastructure capital fund” means such fund operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908) established to raise monies by the trustees for investment by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or sub-section (1) of section 80-IAB or an undertaking developing and building a housing project referred to in sub-section (10) of section 80-IB or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;

(27) [***]

(28) “Inspector of Income-tax” means a person appointed to be an Inspector of Income-tax under sub-section (1) of section 117 ;

(28A) “interest” means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised ;

(28B) “interest on securities” means,—

(i) interest on any security of the Central Government or a State Government ;

(ii) interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provincial Act ;

(28BB) “insurer” means an insurer, being an Indian insurance company, as defined under clause (7A) of section 2 of the Insurance Act, 1938 (4 of 1938), which has been granted a certificate of registration under section 3 of that Act;

(28C) “Joint Commissioner” means a person appointed to be a Joint Commissioner of Income-tax or an Additional Commissioner of Income-tax under sub­section (1) of section 117;

⁷[(28CA) “Joint Commissioner (Appeals)” means a person appointed to be a Joint Commissioner of Income-tax (Appeals) or an Additional Commissioner of Income-tax (Appeals) under sub-section (1) of section 117;]

(28D) “Joint Director” means a person appointed to be a Joint Director of Income-tax or an Additional Director of Income-tax under sub-section (1) of section 117;

(29) “legal representative” has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908 (5 of 1908) ;

(29A) “liable to tax”, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of that country; (29AA) “long-term capital asset” means a capital asset which is not a short-term capital asset ;

(29B) “long-term capital gain” means capital gain arising from the transfer of a long-term capital asset ;

(29BA) “manufacture”, with its grammatical variations, means a change in a non-living physical object or article or thing,—

(a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or

(b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure;

(29C) “maximum marginal rate” means the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of income in the case of an individual , association of persons or, as the case may be, body of individuals as specified in the Finance Act of the relevant year;

(29D) “National Tax Tribunal” means the National Tax Tribunal established under section 3 of the National Tax Tribunal Act, 2005;

(30) “non-resident” means a person who is not a “resident”, and for the purposes of sections 92, 93 and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of section 6;

(31) “person” includes—

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.

Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains;

(32) “person who has a substantial interest in the company”, in relation to a company, means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty per cent of the voting power ;

(33) “prescribed” means prescribed by rules made under this Act ;

(34) “previous year” means the previous year as defined in section 3 ;

(34A) “Principal Chief Commissioner of Income-tax” means a person appointed to be a Principal Chief Commissioner of Income-tax under sub-section (1) of section 117;

(34B) “Principal Commissioner of Income-tax” means a person appointed to be a Principal Commissioner of Income-tax under sub-section (1) of section 117;

(34C) “Principal Director of Income-tax” means a person appointed to be a Principal Director of Income-tax under sub-section (1) of section 117;

(34D) “Principal Director General of Income-tax” means a person appointed to be a Principal Director General of Income-tax under sub-section (1) of section 117;

(35) “principal officer”, used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—

(a) the secretary, treasurer, manager or agent of the authority, company, association or body, or

(b) any person connected with the management or administration of the local authority, company, association or body upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer thereof ;

(36) “profession” includes vocation ;

(36A) “public sector company” means any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ;

(37) “public servant” has the same meaning as in section 21 of the Indian Penal Code (45 of 1860) ;

(37A) “rate or rates in force” or “rates in force”, in relation to an assessment year or financial year, means—

(i) for the purposes of calculating income-tax under the first proviso to sub-section (5) of section 132, or computing the income-tax chargeable under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 or deducting income-tax under section 192 from income chargeable under the head “Salaries” or computation of the “advance tax” payable under Chapter XVII-C in a case not falling under section 115A or section 115B or section 115BB or section 115BBB or section 115E or section 164 or section 164A or section 167B, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, and for the purposes of computation of the “advance tax” payable under Chapter XVII-C in a case falling under section 115A or section 115B or section 115BB or section 115BBB or section 115E or section 164 or section 164A or section 167B, the rate or rates specified in section 115A or section 115B or section 115BB or section 115BBB or section 115E or section 164 or section 164A or section 167B, as the case may be, or the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, whichever is applicable ;

(ii) for the purposes of deduction of tax under sections 193, 194, 194A , 194B [, 194BA] , 194BB and 194D, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year ;

(iii) for the purposes of deduction of tax under section 194LBA or section 194LBB or section 194LBC or section 195, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in an agreement entered into by the Central Government under section 90, or an agreement notified by the Central Government under section 90A, whichever is applicable by virtue of the provisions of section 90, or section 90A, as the case may be;

(38) “recognised provident fund” means a provident fund which has been and continues to be recognised by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees’ Provident Funds Act, 1952 (19 of 1952) ;

(39) [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993;]

(40) “regular assessment” means the assessment made under sub-section (3) of section 143 or section 144 ;

(41) “relative”, in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual ;

(41A) “resulting company” means one or more companies (including a wholly owned subsidiary thereof) to which the undertaking of the demerged company is transferred in a demerger and, the resulting company in consideration of such transfer of undertaking, issues shares to the shareholders of the demerged company and includes any authority or body or local authority or public sector company or a company established, constituted or formed as a result of demerger;

(42) “resident” means a person who is resident in India within the meaning of section 6 ;

(42A) “short-term capital asset” means a capital asset held by an assessee for not more than [twenty-four] months immediately preceding the date of its transfer :

Provided that in the case of a security [***] listed in a recognized stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of an equity oriented fund or a zero coupon bond, the provisions of this clause shall have effect as if for the words “[twenty-four] months”, the words “twelve months” had been substituted:

Provided further that in case of a share of a company (not being a share listed in a recognised stock exchange) or a unit of a Mutual Fund specified under clause (23D) of section 10, which is transferred during the period beginning on the 1st day of April, 2014 and ending on the 10th day of July, 2014, the provisions of this clause shall have effect as if for the words “thirty-six months”, the words “twelve months” had been substituted [as it stood immediately prior to the commencement of the Finance (No. 2) Act, 2024].

^12a[***]

Explanation 1.—(i) In determining the period for which any capital asset is held by the assessee—

(a) in the case of a share held in a company in liquidation, there shall be excluded the period subsequent to the date on which the company goes into liquidation ;

(b) in the case of a capital asset which becomes the property of the assessee in the circumstances mentioned in sub-section (1) of section 49, there shall be included the period for which the asset was held by the previous owner referred to in the said section ;

(ba) in the case of a capital asset referred to in clause (via) of section 28, the period shall be reckoned from the date of its conversion or treatment;

(c) in the case of a capital asset being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, there shall be included the period for which the share or shares in the amalgamating company were held by the assessee ;

(d) in the case of a capital asset, being a share or any other security (hereafter in this clause referred to as the financial asset) subscribed to by the assessee on the basis of his right to subscribe to such financial asset or subscribed to by the person in whose favour the assessee has renounced his right to subscribe to such financial asset, the period shall be reckoned from the date of allotment of such financial asset ;

(e) in the case of a capital asset, being the right to subscribe to any financial asset, which is renounced in favour of any other person, the period shall be reckoned from the date of the offer of such right by the company or institution, as the case may be, making such offer ;

(f) in the case of a capital asset, being a financial asset, allotted without any payment and on the basis of holding of any other financial asset, the period shall be reckoned from the date of the allotment of such financial asset ;

(g) in the case of a capital asset, being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a demerger, there shall be included the period for which the share or shares held in the demerged company were held by the assessee ;

(g) in the case of a capital asset, being trading or clearing rights of a recognised stock exchange in India acquired by a person pursuant to demutualisation or corporatisation of the recognised stock exchange in India as referred to in clause (xiii) of section 47, there shall be included the period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation;

(ha) in the case of a capital asset, being equity share or shares in a company allotted pursuant to demutualisation or corporatisation of a recognised stock exchange in India as referred to in clause(xiii) of section 47, there shall be included the period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation;

(hb) in the case of a capital asset, being any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer free of cost or at concessional rate to his employees (including former employee or employees), the period shall be reckoned from the date of allotment or transfer of such specified security or sweat equity shares;

(hc) in the case of a capital asset, being a unit of a business trust, allotted pursuant to transfer of share or shares as referred to in clause (xvii) of section 47, there shall be included the period for which the share or shares were held by the assessee;

(hd) in the case of a capital asset, being a unit or units, which becomes the property of the assessee in consideration of a transfer referred to in clause (xviii)of section 47, there shall be included the period for which the unit or units in the consolidating scheme of the mutual fund were held by the assessee;

(he) in the case of a capital asset, being share or shares of a company, which is acquired by the non-resident assessee on redemption of Global Depository Receipts referred to in clause (b) of sub-section (1) of section 115AC held by such assessee, the period shall be reckoned from the date on which a request for such redemption was made;

(hf) in the case of a capital asset, being equity shares in a company, which becomes the property of the assessee in consideration of a transfer referred to in clause (xb) of section 47, there shall be included the period for which the preference shares were held by the assessee;

(hg) in the case of a capital asset, being a unit or units, which becomes the property of the assessee in consideration of a transfer referred to in clause (xix) of section 47, there shall be included the period for which the unit or units in the consolidating plan of a mutual fund scheme were held by the assessee;

(hh) in the case of a capital asset, being a unit or units in a segregated portfolio referred to in sub-section (2AG) of section 49, there shall be included the period for which the original unit or units in the main portfolio were held by the assessee;

¹³[(hi) in the case of a capital asset, being—

(a) Electronic Gold Receipt issued in respect of gold deposited as referred to in clause (viid) of section 47, there shall be included the period for which such gold was held by the assessee prior to conversion into the Electronic Gold Receipt;

(b) gold released in respect of an Electronic Gold Receipt as referred to in clause (viid) of section 47, there shall be included the period for which such Electronic Gold Receipt was held by the assessee prior to its conversion into gold;]

(ii) In respect of capital assets other than those mentioned in clause (i), the period for which any capital asset is held by the assessee shall be determined subject to any rules which the Board may make in this behalf.

Explanation 2.—For the purposes of this clause, the expression “security” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).

Explanation 3.—For the purposes of this clause, the expressions “specified security” and “sweat equity shares” shall have the meanings respectively assigned to them in the Explanation to clause (d) of sub-section (1) of section 115WB.

Explanation 4.—For the purposes of this clause, the expression “equity oriented fund” shall have the meaning assigned to it in clause (a) of the Explanation to section 112A;

(42B) “short-term capital gain” means capital gain arising from the transfer of a short-term capital asset ;

(42C) “slump sale” means the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to the individual assets and liabilities in such transfer.

Explanation 1.—For the purposes of this clause, “undertaking” shall have the meaning assigned to it in Explanation 1 to clause (19AA).

Explanation 2.—For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities. Explanation 3.—For the purposes of this clause, “transfer” shall have the meaning assigned to it in clause (47);

(43) “tax” in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA ;

(43A) “tax credit certificate” means a tax credit certificate granted to any person in accordance with the provisions of Chapter XXII-B and any scheme made thereunder ;

(43B) [***]

(44) “Tax Recovery Officer” means any Income-tax Officer who may be authorised by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, by general or special order in writing, to exercise the powers of a Tax Recovery Officer and also to exercise or perform such powers and functions which are conferred on, or assigned to, an Assessing Officer under this Act and which may be prescribed;

(45) “total income” means the total amount of income referred to in section 5, computed in the manner laid down in this Act ;

(46) [***]

(47) “transfer”, in relation to a capital asset, includes,—

(i) the sale, exchange or relinquishment of the asset ; or

(ii) the extinguishment of any rights therein ; or

(iii) the compulsory acquisition thereof under any law ; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or

(iva) the maturity or redemption of a zero coupon bond; or

(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or

(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.

Explanation 1.—For the purposes of sub-clauses (v) and (vi), “immovable property” shall have the same meaning as in clause (d) of section 269UA.

Explanation 2.—For the removal of doubts, it is hereby clarified that “transfer” includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;

(47A) “virtual digital asset” means—

(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;

(b) a non-fungible token or any other token of similar nature, by whatever name called;

(c) any other digital asset, as the Central Government may, by notification in the Official Gazette specify:

Following sub-clause (d) shall be inserted after sub-clause (c) of clause (47A) of section 2 by the Finance Act, 2025, w.e.f. 1-4-2026:

(d) any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not such asset is included in sub-clause (a) or sub-clause (b) or sub-clause (c):

Provided that the Central Government may, by notification in the Official Gazette, exclude any digital asset from the definition of virtual digital asset subject to such conditions as may be specified therein.

Explanation.—For the purposes of this clause,—

(a) “non-fungible token” means such digital asset as the Central Government may, by notification in the Official Gazette, specify;

(b) the expressions “currency”, “foreign currency” and “Indian currency” shall have the same meanings as respectively assigned to them in clauses (h), (m) and (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);

(48) “zero coupon bond” means a bond—

(a)issued by any infrastructure capital company or infrastructure capital fund or infrastructure debt fund or public sector company or scheduled bank on or after the 1st day of June, 2005;

(b) in respect of which no payment and benefit is received or receivable before maturity or redemption from infrastructure capital company or infrastructure capital fund or infrastructure debt fund or public sector company or scheduled bank; and

(c) which the Central Government may, by notification in the Official Gazette, specify in this behalf.

Explanation 1.—For the purposes of this clause, the expression “scheduled bank” shall have the meaning assigned to it in clause (ii) of the Explanation to sub-clause (c) of clause (viia) of sub-section (1) of section 36.

Explanation 2.—For the purposes of this clause, the expression “infrastructure debt fund” shall mean the infrastructure debt fund notified by the Central Government in the Official Gazette under clause (47) of section 10.

Notes:

¹ Words “on account of the applicability of the fourth and fifth provisos thereof” shall be omtt. by Act No. 7 of 2025, w.e.f. 1-4-2026. Words “or an Additional Commissioner of Income-tax (Appeals)” omtt. by Act No. 08 of 2023, w.e.f. 1-4-2023.

² by Act No. 15 of 2024, w.e.f. 1-10-2024.

³ by Act No. 7 of 2025, w.e.f. 1-4-2025.

⁴ by Act No. 15 of 2024, w.e.f. 1-10-2024.

⁵ Clauses (c) and (d) ins. by Act No. 7 of 2025, w.e.f. 1-4-2025.

⁶ by Act No. 08 of 2023, w.e.f. 1-4-2024.

⁷ by Act No. 08 of 2023, w.e.f. 1-4-2023.

⁸ by Act No. 08 of 2023, w.e.f. 1-4-2023.

⁹ for “thirty-six” by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

¹⁰ Words “(other than a unit)” omtt by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

¹¹ for “thirty-six”, by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

¹² by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

^12a Omtt by Act No. 15 of 2024, w.r.e.f. 23-7-2024.

¹³ by Act No. 08 of 2023, w.e.f. 1-4-2024.

Income-tax Rules, 1962

Rule – 2BBB

⁵[Percentage of Government Grant for considering university, hospital, etc., as substantially financed by the Government for the purposes of clause (23C) of section 10.

2BBB. For the purposes of sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10, any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty per cent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.]

Rule – 2BC

Amount of annual receipts for the purposes of sub-clauses (iiiad) and (iiiae) of clause (23C) of section 10.

2BC. (1) For the purposes of sub-clause (iiiad) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any university or other educational institution, existing solely for educational purposes and not for purposes of profit, shall be one crore rupees.

(2) For the purposes of sub-clause (iiiae) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, shall be one crore rupees.

Rule – 2C

⁶[Application for the purpose of grant of approval of a fund or trust or institution or university or any hospital or other medical institution under clause (i) or clause (ii) or clause (iii) or clause (iv) of first proviso to clause (23C) of section 10.

2C. (1) An application under clause (i) or clause (ii) or clause (iii) or clause (iv) of first proviso to clause (23C) of section 10 for the grant of approval of a fund or trust or institution, or university or other educational institution or any hospital or other medical institution (hereinafter referred to as ‘the applicant’) shall be made in the following Form, namely:—

(i) Form No. 10A in case of application under [clause (i) or sub-clause (A) of] clause (iv) of first proviso to clause (23C) of section 10 to the Principal Commissioner or Commissioner authorised by the Board; or

(ii) Form No. 10AB in case of application under clause (ii) or [clause (iii) or sub-clause (B) of clause (iv)] of first proviso to clause (23C) of section 10 to the Principal Commissioner or Commissioner under the said proviso.

(2) The application under sub-rule (1) shall be accompanied by the following documents, as required by Form No. 10A or 10AB, as the case may be, namely: —

(a) where the applicant is created or established, under an instrument, self-certified copy of such instrument creating or establishing the applicant;

(b) where the applicant is created or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant;

(c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;

(d) self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act;

(e) self-certified copy of existing order granting approval under clause (23C) of section 10;

(f) self-certified copy of order of rejection of application for grant of approval under clause (23C) of section 10, if any;

(g) where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the applicant relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;

(h) where a business undertaking is held by the applicant as per the provisions of sub-section (4) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business undertaking relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;

(i) where the income of the applicant includes profits and gains of business as per the provisions of sub-section (4A) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;

(j) note on the activities of the applicant.

(3) Form No. 10A or 10AB, as the case may be, shall be furnished electronically,—

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(4) Form No. 10A or 10AB, as the case may be, shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting approval under clause (i) or (iii) of the second proviso read with the ninth proviso to clause (23C) of section 10 in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (i) of sub-rule (1).

(6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in sub-rule (5) after giving an opportunity of being heard, may cancel the approval granted in Form No. 10AC and Unique Registration Number (URN) issued under sub-rule (5), and such approval in Form No. 10AC or such Unique Registration Number (URN) shall be deemed to have never been granted or issued.

(7) In case of an application made under clause (iv) of first proviso to clause (23C) of [section 10 as it stood immediately before its amendment by the Finance Act, 2023,] during previous year beginning on 1st day of April, 2021, the provisional approval shall be effective from the assessment year beginning on 1st day of April, 2022.

(8) In case of an application made in Form No. 10AB under clause (ii) of sub-rule (1), the order of approval or rejection or cancellation under second proviso read with the ninth proviso to clause (23C) of section 10 shall be in Form No. 10AD and in case if the approval is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued, by the Principal Commissioner or Commissioner referred to in second proviso to clause (23C) of section 10.

(9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the form, data structure, standards and procedure of:

(a) furnishing and verification of Form No. 10A or 10AB, as the case may be;

(b) passing the order under second proviso to clause (23C) of section 10;

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the form so furnished or the order so passed.

⁵ Inserted by the IT (Thirteenth Amdt.) Rules, 2014, w.e.f. 12-12-2014.

⁶ Substituted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

⁷ Substituted for “clause (I) or” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁸ Substituted for “clause (III)” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁹ Substituted for “section 10” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

Rule – 11AA

[Requirement for approval of institution of fund under clause (vi) of sub-section (5) of section 80G.

11AA. (1) An application for approval under clause (vi) of sub-section (5) of section 80G, the institution or fund (hereinafter referred to as ‘the applicant’) shall be made in the following Form, namely:—

(a) Form No. 10A in case of application under [clause (i) or sub-clause (A) of] clause (iv) of first proviso to sub-section (5) of section 80G to the Principal Commissioner or Commissioner authorised by the Board; or

⁶⁷[(b) Form No. 10AB in case of application under clause (ii) or clause (iii) or sub-clause (B) of clause (iv) of the first proviso to sub-section (5) of section 80G to the Principal Commissioner or Commissioner authorised under the said proviso.]

(2) The application under sub-rule (1) shall be accompanied by the following documents, as required by Form No. 10A or 10AB, as the case may be, namely: —

(a) where the applicant is created, or established, under an instrument, self-certified copy of the instrument;

(b) where the applicant is created, or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant;

(c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;

(d) self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act;

(e) self-certified copy of existing order granting registration under clause (vi) of sub-section (5) of section 80G;

(f) self-certified copy of order of rejection of application for grant of approval under clause (vi) of sub-section (5) of section 80G, if any;

(g) where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the applicant relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;

(h) note on the activities of the applicant.

(3) Form No. 10A or 10AB, as the case may be, shall be furnished electronically, —

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(4) Form No. 10A or 10AB, as the case may be, shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

(5) On receipt of an application in Form No.10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting approval under clause (i) or (iii) of the second proviso read with third proviso of sub-section (5) of section 80G in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (a) of sub-rule (1).

(6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in sub-rule (5), after giving an opportunity of being heard, may cancel the approval granted in Form No. 10AC and Unique Registration Number (URN), issued under sub-rule (5), and such approval or such Unique Registration Number (URN) shall be deemed to have never been granted or issued.

⁶⁸[(7) In case of an application made under,—

(i) clause (iv) of the first proviso to sub-section (5) of section 80G as it stood immediately before its amendment vide the Finance Act, 2023; or

(ii) sub-clause (A) of clause (iv) of first proviso to sub-section (5) of section 80G, the provisional approval shall be effective from the assessment year relevant to the previous year in which such application is made.]

(8) In case of an application made in Form No. 10AB under clause (ii) of sub-rule (1), the order of approval or rejection or cancellation under second proviso to sub-section (5) of section 80G shall be in Form No. 10AD and in case if the approval is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued, by the Principal Commissioner or Commissioner referred to in second proviso to sub-section (5) of section 80G.

(9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the data structure, standards and procedure of,—

(a) furnishing and verification of Form No. 10A or 10AB, as the case may be;

(b) passing the order under second proviso to sub-section (5) of section 80G;

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made or order so passed as the case may be.

⁶⁵ Substituted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

⁶⁶ Substituted for “clause (i) or” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁶⁷ Substituted by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁶⁸ Substituted by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

Rule – 16CC

[Form of report of audit prescribed under tenth proviso to section 10(23C).

16CC. The report of audit of the accounts of a fund or institution or trust or any university or other educational institution or any hospital or other medical institution which is required to be furnished under clause (b) of the tenth proviso to clause (23C) of section 10 shall be in—

(a) Form No. 10B where—

(I) the total income of such fund or institution or trust or university or other educational institution or hospital or other medical institution, without giving effect to the provisions of the sub-clauses (iv), (v), (vi) and (via) of the said clause, exceeds rupees five crores during the previous year; or

(II) such fund or institution or trust or university or other educational institution or hospital or other medical institution has received any foreign contribution during the previous year; or

(III) such fund or institution or trust or university or other educational institution or hospital or other medical institution has applied any part of its income outside India during the previous year;

(b) Form No. 10BB in other cases.

Explanation.—For the purposes of sub-clause (II) of clause (a), the expression “foreign contribution” shall have the same meaning assigned to it in clause (h) of sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of

⁴⁸ Substituted by the IT (Third Amdt.) Rules, 2023, w.e.f. 1-4-2023.

Rule – 17

⁵¹ [Exercise of option, etc., under Explanation 3 to the third proviso to clause (23C) of section 10 or section 11.

17.(1) The option to be exercised in accordance with the provisions of the Explanation to sub-section (1) of section 11 of the Act in respect of income of any previous year relevant to the assessment year beginning on or after the 1st day of April, 2016 shall be in Form No. 9A and shall be furnished before the expiry of the time allowed under sub-section (1) of section 139 of the Act for furnishing the return of income of the relevant assessment year.

(2) The statement to be furnished to the Assessing Officer or the prescribed authority under clause (a) of the Explanation 3 to the third proviso to clause (23C) of section 10 of the Act or under clause (a) of sub-section (2) of section 11 of the Act or under the said provision as applicable under clause (21) of section 10 of the Act shall be in Form No. 10 and shall be furnished before the expiry of the time allowed under sub-section (1) of section 139 of the Act, for furnishing the return of income.

(3) The option in Form No. 9A referred to in sub-rule (1) and the statement in Form No. 10 referred to in sub-rule (2) shall be furnished electronically either under digital signature or electronic verification code.

(4) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall—

(i) specify the procedure for filing of Forms referred to in sub-rule (3);

(ii) specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule (3), for purpose of verification of the person furnishing the said Forms; and

(iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to Forms so furnished.]

⁵¹ Substituted by the IT (Twenty-fifth Amdt.) Rules, 2022, w.e.f. 1-4-2023.

Rule – 17A

[Application for registration of charitable or religious trusts, etc.

17A. (1) An application under sub-clause (i) or sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) of clause (ac) of sub­section (1) of section 12A for registration of a charitable or religious trust or institution (hereinafter referred to as ‘the applicant’) shall be made in the following Form, namely:—

(i) Form No. 10A in case of application under [sub-clause (i) or item (A) of sub-clause] (vi) of clause (ac) of sub-section (1) of section 12A to the Principal Commissioner or Commissioner authorised by the Board; or

(ii) Form No. 10AB in case of application under sub-clause (ii) or (iii) or (iv) [or (v) or item (B) of sub-clause (vi)] of clause (ac) of sub-section (1) of section 12A to the Principal Commissioner or Commissioner under the said clause.

(2) The application under sub-rule (1) shall be accompanied by the following documents, as required by Form No.10A or 10AB, as the case may be, namely: —

(a) where the applicant is created, or established, under an instrument, self-certified copy of such instrument creating or establishing the applicant;

(b) where the applicant is created, or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant;

(c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;

(d) self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act;

(e) self-certified copy of existing order granting registration under section 12A or section 12AA or section 12AB, as the case may be;

(f) self-certified copy of order of rejection of application for grant of registration under section 12A or section 12AA or section 12AB, as the case may be, if any;

(g) where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the applicant relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;

(h) where a business undertaking is held by the applicant as per the provisions of sub-section (4) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business undertaking relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;

(i) where the income of the applicant includes profits and gains of business as per the provisions of sub-section (4A) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;

(j) self-certified copy of the documents evidencing adoption or modification of the objects;

(k) note on the activities of the applicant.

(3) Form No. 10A or 10AB, as the case may be, shall be furnished electronically, —

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(4) Form No. 10A or 10AB, as the case may be, shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting registration under clause (a), or clause (c), of sub-section (1) of section 12AB read with sub-section (3) of the said section in Form No.10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (i) of sub-rule (1).

(6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in sub-rule (5), after giving an opportunity of being heard, may cancel the registration in Form No. 10AC and Unique Registration Number (URN), issued under sub-rule (5), and such registration or such Unique Registration Number (URN) shall be deemed to have never been granted or issued.

(7) In case of an application made under sub-clause (vi) of clause (ac) of sub-section (1) of [section 12A as it stood immediately before its amendment vide the Finance Act, 2023,] during previous year beginning on 1st day of April, 2021, the provisional registration shall be effective from the assessment year beginning on 1st day of April, 2022.

(8) In case of an application made in Form No. 10AB under clause (ii) of sub-rule (1), the order of registration or rejection or cancellation of registration under sub-clause (ii) of clause (b) of sub-section (1) of section 12AB shall be in Form No.10AD and in case if the registration is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued by the Principal Commissioner or Commissioner referred to in sub-section (1) of section 12AB.

(9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the form, data structure, standards and procedure of,—

(a) furnishing and verification of Form No. 10A or 10AB, as the case may be;

(b) passing the order under clause (a), sub-clause (ii) of clause (b) and clause (c) of sub-section (1) of section 12AB;

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made or order so passed as the case may be.]

⁵² Substituted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

⁵³ Substituted for “sub-clause (i) or” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

⁵⁴ Substituted for “or (v)” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

^55.Substituted for “section 12A” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.

Rule – 17B

[Audit report in the case of charitable or religious trusts, etc.

17B. The report of audit of the accounts of a trust or institution which is required to be furnished under sub-clause (ii) of clause (b) of sub-section (1) of section 12A, shall be in—

(a) Form No. 10B where—

(I) the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12 of the Act, exceeds rupees five crores during the previous year; or

(II) such trust or institution has received any foreign contribution during the previous year; or

(III) such trust or institution has applied any part of its income outside India during the previous year;

(b) Form No. 10BB in other cases.

Explanation.—For the purposes of sub-clause (II) of clause (a), the expression “foreign contribution” shall have the same meaning assigned to it in clause (h) of sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010).]

⁵⁷ Substituted by the IT (Third Amdt.) Rules, 2023, w.e.f. 1-4-2023.

Rule – 17C

Forms or modes of investment or deposits by a charitable or religious trust or institution.

17C. The forms and modes of investment or deposits under clause (xii) of sub-section (5) of section 11 shall be the following, namely :—

(i) investment in the units issued under any scheme of the mutual fund referred to in clause (23D) of section 10 of the Income-tax Act, 1961;

(ii) any transfer of deposits to the Public Account of India;

(iii) deposits made with an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;

(iv) investment by way of acquiring equity shares of a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996);

(v) investment made by a recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter referred to as investor) in the equity share capital of a company (hereafter referred to as investee)—

(A) which is engaged in dealing with securities or mainly associated with the securities market;

(B) whose main object is to acquire the membership of another recognised stock exchange for the sole purpose of facilitating the members of the investor to trade on the said stock exchange through the investee in accordance with the directions or guidelines issued under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by the Securities and Exchange Board of India established under section 3 of that Act; and

(C) in which at least fifty-one per cent of equity shares are held by the investor and the balance equity shares are held by members of such investor;

⁵⁸[(va) investment made by a person, authorised under section 4 of the Payment and Settlement Systems Act, 2007, in the equity share capital or bonds or debentures of a company—

(A) which is engaged in operations of retail payments system or digital payments settlement or similar activities in India and abroad and is approved by the Reserve Bank of India for this purpose; and

(B) in which at least fifty-one per cent of equity shares are held by National Payments Corporation of India;]

⁵⁹[(vb) investment made by a person, authorised under section 4 of the Payment and Settlement Systems Act, 2007 (51 of 2007), in the equity share capital or bonds or debentures of Open Network for Digital Commerce Ltd., being a company incorporated under sub-section (2) of section 7 read with sub­section (1) of section 8 of the Companies Act, 2013 (18 of 2013), for participating in network based open protocol models which enable digital commerce and interoperable digital payments in India;]

(vi) investment by way of acquiring equity shares of an incubatee by an incubator.

Explanation.—For the purposes of this clause,—

(a) “incubatee” shall mean such incubatee as may be notified by the Government of India in the Ministry of Science and Technology;

(b) “incubator” shall mean such Technology Business Incubator or Science and Technology Entrepreneurship Park as may be notified by the Government of India in the Ministry of Science and Technology;

(vii) investment by way of acquiring shares of National Skill Development Corporation;

(viii) investment in debt instruments issued by any infrastructure Finance Company registered with the Reserve Bank of India;

⁶⁰[(ix) investment in “Stock Certificate” as defined in clause (c) of paragraph 2 of the Sovereign Gold Bonds Scheme, 2015, published in the Official Gazette vide notification number G.S.R. 827(E), dated the 30th October, 2015;]

⁶¹[(x) investment by way of acquiring units of POWERGRID Infrastructure Investment Trust.]

⁵⁸ Inserted by the IT (Seventh Amdt.) Rules, 2020, w.e.f. 5-3-2020.

⁵⁹ Inserted by the IT (Tenth Amdt.) Rules, 2022, w.e.f. 22-4-2022.

⁶⁰ Inserted by the IT (Eighth Amdt.) Rules, 2016, w.e.f. 23-3-2016.

⁶¹ Inserted by the IT (Twenty-eighth Amdt.) Rules, 2023, w.e.f. 18-12-2023.

Income Tax Forms

Form No. : 1

¹[Appendix IV
FORM NO. 1
[See rule 11UE (1)]

Undertaking under sub-rule (1) of rule 11UE of the Income-tax Rules, 1962

To,
Principal Commissioner/Commissioner
………… …………….. ………………………………..

Sir/Madam,

I ……………………………………..  (name in block letters) son/daughter of …………………………………… designation …………………………………..  and nationality ………………………………….  and related passport number………………………………….. (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) …………………………………………………………………. on behalf of …………………………………………  (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ………………………………………..  and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be ,hereby declare as follows:

(a) That specified orders have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside India made before the 28th day of May, 2012 and particulars of such specified orders are provided in Part A of the Annexure.

(b) The declarant has (strike off the options that are not applicable),

(i) not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings constituted under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part B of the Annexure;

(ii) filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and has irrevocably withdrawn, on a with prejudice basis, all such appeals or applications or petitions or proceeding and evidence thereof is furnished herewith and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the declarant, are provided in Part C of the Annexure;

(iii) filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the declarant have been disposed of and no further appeal or application or petition or proceeding has been filed by the declarant and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part C of the Annexure;

(iv) filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The declarant further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the declarant and their status as on the date of this undertaking, are provided in Part D of the Annexure;

(c) The declarant has (strike off the options that are not applicable),

(i) not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part B of the Annexure;

(ii) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the declarant, are provided in Part E of the Annexure;

(iii) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the declarant have been disposed of and no further proceeding has been initiated by the declarant and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part E of the Annexure;

(iv) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. Particulars of such pending proceeding and notices filed by the declarant are provided in Part F of the Annexure. The declarant hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders;

(v) received or got any awards, orders, judgments or any other reliefs issued in favour of the declarant, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the declarant or by India and any Indian affiliate. The declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs or relief in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment or any other relief issued in favour of the declarant. The declarant hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part G of the Annexure;

(d) The declarant has (strike off the options that are not applicable),

(i) not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part B of the Annexure;

(ii) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The declarant has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments and evidence thereof is furnished herewith. Particulars of such proceeding, initiated and withdrawn or discontinued by the declarant, are provided in Part H of the Annexure;

(iii) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the declarant have been disposed of and no further proceeding has been filed by the declarant and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part H of the Annexure;

(iv) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, the declarant has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian Affiliate. The declarant hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding are provided in Part I of the Annexure. The declarant also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e).

(e) The declarant hereby undertakes as follows:

(i) to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c), and (d) above, and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, declarant shall act in accordance with this undertaking and in full cooperation with the Republic of India;

(ii) to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the declarant or by Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For the avoidance of doubt, the declarant’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d) above. For further avoidance of doubt, the declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian affiliate to set aside such award, order or judgement ordered, issued or passed in favour of the declarant. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order;

(iii) to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment, or any other relief issued in favour of the declarant.

(f) The declarant specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.

(g) The declarant hereby undertakes to irrevocably terminate, release, discharge and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the declarant under any law for the time being in force, in equity, under any statute or under any agreement entered into by Republic of India with any country or territory outside Republic of India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the declarant or by Republic of India and any Indian affiliate. For the avoidance of doubt, the declarant’s above waiver includes an irrevocable waiver of any claim against India and any Indian Affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the declarant hereby undertakes (for itself and on behalf of all related parties) to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.

(h) The declarant further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking. Where any such claim or right is transferred, the declarant confirms that it has provided the particulars of all the interested parties in Part L, and the undertakings from each of such interested parties is attached with this undertaking in accordance with Part M of the Annexure.

(i) In the event that, notwithstanding the foregoing, any person asserts, brings, files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”) at any time on or after the date of furnishing this undertaking, the declarant shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney’s fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The declarant specifically represents that, to the best of its knowledge, after—

(i) the execution of this undertaking;

(ii) the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

(iii) irrevocable withdrawal of all pending proceeding as outlined in this undertaking,

no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliates. To avoid any doubt, the declarant’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained the declarant’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.

(j) For the removal of any doubt, the declarant fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant fails to obtain any release from such person, the declarant warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.

(k) The declarant further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any person (including but not limited to any related party or interested party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The declarant shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where this Form is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice or press release shall include, among other things, confirmation that,—

(i) the declarant (and its related parties) forever irrevocably forgo any reliance on any right and provisions under any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders;

(ii) the declarant has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliates with respect to any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;

(iii) the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate, including by related parties or interested parties, contrary to the release; and

(iv) the declarant confirms it will treat any such award, judgment or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.

(l) The declarant confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.

(m) The declarant represents and warrants that:

(i) it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j)under applicable law;

(ii) the execution, delivery and performance of this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) has been duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law (see Note 3);

(iii) this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against the declarant in accordance with its terms;

(iv) such authorisations described in the above sub-clauses (i), (ii) and (iii) are effective under applicable law, and to this end, letters from local counsel in the relevant jurisdictions are attached to this undertaking which confirm the legality of such authorisations under applicable law.

(n) The declarant confirms that by submitting the present undertaking, it fulfills the conditions specified in the Explanation below the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9.

(o) The details of the bank account in which the refund may be credited are provided in Part J of the Annexure.

(p) The details of all the interested parties are provided in Part K and Part L of the Annexure. The undertaking in Part M of the Annexure by each of such persons is attached with this undertaking. The declarant represents and warrants that:

(i) all such undertakings have been executed and delivered by the person who has full legal power and authority to execute and deliver such undertakings;

(ii) the execution, delivery and performance of this undertaking has been duly authorised by all necessary corporate action; and

(iii) this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against such person in accordance with its terms. Such separate, related undertakings may take the same form as this undertaking.

(q) The declarant is or is not covered under sub-rule (6) of rule 11UF and in case if the declarant is not covered under said sub-rule all the conditions provided under sub-rule (2) of rule 11UE have been fulfilled.

(r) This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant income-tax authorities, tribunals or courts in Republic of India, as the case may be, which are empowered to decide disputes under the Act.

I also confirm that I am aware of all the consequences and implications of this undertaking.

Place:…………………….
Date: …………………….

Signature
………………………..

Attachments

1. The Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking

2. An indemnity bond to the effect of clause (i) and clause (j) of the undertaking attached in Part N of the undertaking.

3. Copy of the public notice referred to in clause (k) of the undertaking, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.

4. Attachments as required in different parts of the Annexure to this undertaking.

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the declarant are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the declarant; and

(b) record the declarant’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.

VERIFICATION

Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.

Verified at________________ place_______________ on this the_________ day________________ of ______ month_______________ , year                                .

Place:…………………….
Date: …………………….

Signature
……………………….

Annexure

Part A– Particulars of the relevant order or orders:

Sl. No.	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Taxes or penalty determine d	Interest	Total demand	Relief, provided in any appeal proceeding, if any	Demand recovered from the declarant	Pending demand or refund due as on date	Details of the attachments made by any Income-tax Authority
			Section and sub-sectio n of the Income-ta x Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)

Part B– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking).	No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking).	No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking).
(1)	(2)	(3)	(4)	(5)
		Applicable or Not applicable	Applicable or Not applicable	Applicable or Not applicable

Part C: Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding	Date of disposing of or withdrawal such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court accepting the withdrawal or disposing of)
(1)	(2)	(3)	(4)	(5)	(6)

Part D – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clauses (b) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for  Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding
(1)	(2)	(3)	(4)	(5)

Part E – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (ii) and (iii) of clause (c) of the undertaking:

Sr. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued	Date of initiating the proceeding for arbitration, conciliation or mediation/ issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation	Date of disposing of or withdrawal of such proceeding for arbitration, conciliation or mediation, or notices (Please attach evidence of such disposing of or withdrawal, including order of the Tribunal or court or other judicial or quasi-judicial or administrative authority).
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part F – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:

Sl. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending of notices thereof have been issued	Date of initiating the proceeding for arbitration, conciliation or mediation /issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part G – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part A here the relevant order is mentioned	Nature of such award, order or judgment or any other relief	Particulars (including the name of the country) where proceeding related to such award, order, judgment or any other relief were held	Date of such award, order, judgment or any other relief along with reference number	Status of the award, order, judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)

Part H – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of proceeding to enforce such  ward, order or judgment or any other relief	Particulars (including the name of the country) where such proceeding to enforce any  ward, order or judgment or any other relief are taking place	Date of filing proceeding to enforce any  ward, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such  ward, order or judgment or any other relief	Date of disposing of or withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of/ withdrawal, including order of the Court or other judicial authority).
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part I – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clause (iv) of clause (d) of the undertaking:

Sl. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country) where such proceeding to enforce any ward, order or judgment or any other relief are taking place	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part J – Details of bank account in Republic of India to which the refund is to be remitted

Sl. No.	Bank Name and Address	Account Number and other required details for remittance
(1)	(2)	(3)

Part K– Details of all the companies or entities in the entire chain of holding of the declarant till the ultimate holding company or entity of the declarant:

Sl. No.	Name of holding company	Percentage of the ownership by such holding company in the declarant as on the date of undertaking	If the ownership in the declarant is not held directly by such holding company, the chain of ownership with the names of all the companies in the chain of ownership
(1)	(2)	(3)	(4)

Part L- Details of all the interested parties other than the interested parties covered under Part K

Sl. No.	Name of such persons whose interest may be affected directly or indirectly by this undertaking	Nature of interest of such person	Amount of interest of such person (Rs), if available
(1)	(2)	(3)	(4)

PART M Undertaking by person(s) declared in Part K and Part L of the Undertaking

To,
Principal Commissioner/Commissioner

Sir/Madam,

…………………. ……………….

I………………….. (name in block letters) son/daughter of…………………………………………….. designation ……………….. .and nationality …………………………. .and related passport number……………………………… (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) ………………………………. on behalf of …………………………………. . (name of the interested party)
having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) …………………………………………. . and being duly authorised and competent to represent the interested party in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be , hereby declare as follows:

(a) The particulars of specified orders that have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside Republic of India made before the 28th day of May, 2012 in the case of declarant and the nature of interest of the interested party in such specified orders are provided in Part MA of the Annexure.

(b) The interested party has (strike off options that are not applicable):

(i) not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part MB of the Annexure;

(ii) filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn all such appeals or applications or petitions or proceeding or such appeals or applications or petitions or proceeding have been disposed at any time before the date of filing Form No. 1, and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the interested party, are provided in Part MC of the Annexure.

(iii) filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the interested party have been disposed of and no further appeal or application or petition or proceeding has been filed by the interested party and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part MC of the Annexure.

(iv) filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The interested party further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the interested party and their status as on the date of this undertaking, are provided in Part D of the Annexure. Particulars of any appeals or applications or petitions or proceeding as described in this clause (b) which are not covered by the sub-clauses (i) and (ii) are also provided in Part MD of the Annexure.

(c) The interested party has (strike off options that are not applicable):

(i) not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part MB of the Annexure;

(ii) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the interested party, are provided in Part ME of the Annexure.

(iii) initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the interested party have been disposed of and no further proceeding has been initiated by the interested party and evidence thereof is furnished herewith. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part ME of the Annexure.

(iv) has initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside Republic of India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e). Particulars of such pending proceeding and notices filed by the interested party are provided in Part F of the Annexure. The interested party hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of any proceeding for arbitration, conciliation or mediation, or notices thereof, which are not covered by the sub-clause (i) and sub- clause (ii), are also provided in Part MF of the Annexure.

(v) received or got any awards, orders, judgements or any other reliefs issued in favour of the interested party, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. The interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic to set aside such award, order or judgment issued in favour of the interested party. The interested party hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part MG of the Annexure.

(d) The interested party has (strike off options that are not applicable):

(i) not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part MB of the Annexure.

(ii) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The interested party has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and withdrawn or discontinued by the interested party, are provided in Part MH of the Annexure.

(iii) initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the interested party have been disposed of and no further proceeding has been filed by the interested party and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part MH of the Annexure.

(iv) initiated proceeding to enforce or pursue attachments in respect of any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, interested party has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding, are provided in Part MI of the Annexure. Particulars of any such proceeding, to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief, which are not covered by the sub-clauses (i) and (ii), are also provided in Part MI of the Annexure. The interested party also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e) below.

(e) The interested party hereby undertakes as follows: –

(i) to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against Republic of India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c) and (d) and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, interested party shall act in accordance with this undertaking and in full cooperation with the Republic of India.

(ii) to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order, judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d). The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For further avoidance of doubt, the interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian Affiliate to set aside such award, order or judgment ordered, issued or passed in favour of the interested party. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order.

(iii) to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment, or any other relief issued in favour of the interested party.

(f) The interested party specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.

(g) The interested party hereby undertakes to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the interested party under any law for the time being in force, in equity, under any statute or under any agreement entered into by India with any country or territory outside India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s above waiver includes an irrevocable waiver of any claim against India and any Indian affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the interested party hereby undertakes to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.

(h) The interested party further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking.

(i) In the event that, notwithstanding the foregoing, any person asserts, brings , files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”)at any time on or after the date of furnishing this undertaking, the interested party shall indemnify, defend and hold harmless such releasee from and against any and all costs, expenses (including attorneys’ fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The interested party specifically represents that, to the best of its knowledge, after

(i) the execution of this undertaking;

(ii) the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

(iii) irrevocable withdrawal of all pending proceeding as outlined in this undertaking.

no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliate. To avoid any doubt, the interested party’s indemnity of releasees shall include any claim brought by any third party alleging that it has obtained the interested party’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.

(j) For the avoidance of any doubt, the interested party fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the interested party fails to obtain any release from such person, the interested party warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.

(k) The interested party further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any party (including but not limited to any related party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The interested party shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where Form No. 3 is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice shall include, among other things, confirmation that,-

(i) the interested party forever irrevocably forgoes any reliance on any right and provisions under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders;

(ii) the interested party has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliate with respect to any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;

(iii) the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate contrary to the release; and

(iv) the interested party confirms it will treat any such award, judgment, or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.

(l) The interested party confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.

(m) The interested party represents and warrants that:

(i) it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) under applicable law;

(ii) the execution, delivery and performance of this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) has been duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law (see Note 3);

(iii) this undertaking constitutes the legal, valid and binding obligation of the interested party, enforceable against the interested party in accordance with its terms;

(iv) such authorisations described in the above sub-clauses (i), (ii) and (iii) are effective under applicable law, and to this end, letters from local counsel in the relevant jurisdictions are attached to this undertaking which confirm the legality of such authorisations under applicable law; and

(n) This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant Income-tax authorities, tribunals or courts in India, as the case may be, which are empowered to decide disputes under the Act.

I also confirm that, I am aware of all the consequences and implications of this undertaking.

Place: ……………….. .
Date: ……………………….. .

Signature ………………………

Attachments

1. The Board Resolution and legal authorisation, as referred to in clause (m) of Part M.

2. An indemnity bond to the effect of clauses (i) and (j) of Part M in Part N of the undertaking in Form No. 1;

3. Copy of the public notice referred to in clause (k) of Part M, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.

4. Attachments as required in different parts of the Annexure to Part M of this undertaking

Notes:

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number/Aadhaar Number or Tax Deduction Account Number of the interested party are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

• • record the Signatory’s power and authority to give the undertaking on behalf of the interested party; and
  • record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.

VERIFICATION

Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.

Verified at ______ place_________ on this the ___day ____of___month______ ,_year________ .

Place: ……………..
Date: ……………….

Signature ………………….

………………….

Annexure

Part MA– Particulars of the relevant order or orders:

Sl. No.	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Nature of interest of the interested party
			Section and sub-section of the Income-tax Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)

Part MB– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking).	No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking).	No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking).
(1)	(2)	(3)	(4)	(5)
		Applicable or Not applicable	Applicable or Not applicable	Applicable or Not applicable

Part MC – Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding	Date of disposing of or withdrawal such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court accepting the withdrawal or disposing of)
(1)	(2)	(3)	(4)	(5)	(6)

Part MD – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding
(1)	(2)	(3)	(4)	(5)

Part ME – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clauses (ii) and (iii) of clause (c) of the undertaking:

Sl. No.	Sl. No Part MA where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (Including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued	Date of initiating the proceeding for arbitration, conciliation or mediation/ issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation	Date of disposing of or withdrawal of such proceeding for arbitration, conciliation or mediation, or notices (Please attach evidence of such disposing of or withdrawal, including order of the Tribunal or court or other judicial or quasi-judicial or administrative authority).
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part MF – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (Including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending of notices thereof have been issued	Date of initiating the proceeding for arbitration, conciliation or mediation or issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part MG – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of such award, order or judgment or any other relief	Particulars (Including the name of the country) where proceeding related to such award, order, judgment or any other relief were held	Date of such award, order, judgment or any other relief along with reference number	Status of the award, order, judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)

Part MH – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (Including the name of the country)where such proceeding to enforce any award, order or judgment or any other relief are taking place	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief	Date of disposing of/ withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of or withdrawal, including order of the Court or other judicial authority)
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part MI – Particulars of the proceeding under sub-clause (iv) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (Including the name of the country)where such proceeding to enforce any award, order or judgment or any other relief are taking place	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part N

INDEMNITY BOND

This Indemnity Bond (“Bond”) is made on this………….. day of……….. , 2021 by………….. (name in block letters) son/daughter of………………….. designation and nationality……………………… and related passport number…………….. (hereinafter referred to as “Signatory”) having Permanent Account Number/Aadhaar Number/Tax Deduction Account Number (See Note 1)………………. on behalf of……………. (name of the declarant or interested party, as the case may be) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number………………………… (See Note 2) and being duly authorised and competent to represent the declarant or interested party, as the case may be, in this regard pursuant to Board Resolution or legal authorisation (See Note 3), of the FIRST PART.

And

The Republic of India and any Indian affiliate (hereinafter collectively referred to as “releasees”) of the OTHER PART

WHEREAS:

A. The Income-tax Rules, 1962 have been amended and the Income-tax (31st Amendment) Rules, 2021 have come into force from the date of their publication in the Official Gazette.

B. The declarant or interested party, as the case may be, has filed an undertaking under sub-rule (1) of rule 11UE of the Income -tax Rules, 1962, to which this indemnity bond is annexed. Any defined terms not defined herein shall have the same meaning as the definitions given under rule 11UE and the undertaking.

C. Pursuant to the above, the declarant or interested party, as the case may be, has agreed to indemnify, defend and hold harmless the Republic of India and Indian affiliates from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of any claim at any time after the date of furnishing the undertaking in Form No. 1 by any person, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, and the declarant or interested party, as the case may be, has agreed to furnish an indemnity bond to this effect, such that the declarant or interested party, as the case may be, fully assumes the risk of any omission or mistake with respect to identification and procurement of authorisations and undertakings from any related parties or interested parties as provided in the undertaking, and securing the Republic of India and Indian affiliates from any claim related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief or to the dispute underlying the award against the Republic of India or Indian affiliates in connection with the relevant order or orders.

D. Accordingly the declarant or interested party, as the case may be, is executing this Indemnity Bond in favour of the Republic of India on the terms appearing hereunder.

NOW THIS INDEMINTY BOND WITNESSETH AS FOLLOWS:

1. In the event that any person or entity asserts, brings, files or maintains any claim against any releasee at any time on or after the date of furnishing this undertaking, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, against the Republic of India or Indian affiliates in connection with the relevant order or orders, the declarant or interested party, as the case may be, shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim.

2. The declarant or interested party, as the case may be, specifically represents that, to the best of its knowledge, after—

(i) the execution of this undertaking;

(ii) the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

(iii) withdrawal of all pending proceeding as outlined in this undertaking,

that no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, or any aspect of the dispute underlying the award shall remain outstanding against the Republic of India or other releasee.

Explanation I.-For the removal of any doubt, the declarant’s or interested party’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained declarant’s or interested party’s, as the case may be, claims under an award, judgment or court order or the relevant order or orders.

Explanation II.- the declarant or interested party, as the case may be, fully assumes the risk through this indemnity of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant or interested party, as the case may be, fails to obtain any release from such person, the declarant or interested party, as the case may be, indemnifies through this document the releasees from any defense costs, court costs, and damages.

3. This Indemnity Bond shall be governed by the relevant laws of India and the Delhi High Court shall have sole jurisdiction to entertain and try any dispute or difference arising out of or in connection with the terms of this Bond.

IN WITNESS WHEREOF the undersigned herein has signed and set his hands on this ……………….  day of………… , 2021.

For and on behalf of the declarant or interested party, as the case may be,

__________

Name and address of Witness

Signature of the Witness

1.

2.

Place:
Date:

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the declarant or interested party, as the case may be, are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the declarant or interested party, as the case may be; and

(b) record the declarant or interested party’s power and authority, as the case may be, to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking).]

Form No. : 2

¹[FORM NO. 2
[See rule 11UF]
Form for Certificate Under sub-rule (2) of rule 11UF

<Name of the declarant>
Address of the declarant

Sir/Madam

1. The……………………… (name of the declarant) (hereinafter referred to as the declarant) with Permanent Account Number/Aadhaar number/Tax Deduction Account Number/Company Identification Number and Taxpayer Identification Number……….. has filed an undertaking in Form No. 1 dated………. under sub-rule (1) of the rule 11UE of the rules.

2. Pursuant to the undertaking filed by the declarant in Form No. 1 under sub-rule (1) of rule 11UE, the provisions of fifth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act shall be applicable to the orders mentioned below, subject to the fulfilment of the conditions specified in said proviso read with relevant rules and fulfilment of the undertakings by the declarant in Form No. 1:

TABLE

Sl. No.	Sl. No. of the Table in Part A of Form No. 1 where the relevant order is mentioned	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Taxes or Penalty determined	Interest	Total demand	Relief, provided in any appeal proceeding, if any	Demand recovered from the declarant	Pending demand or refund due as on date	Details of the attachments made by any Income-tax Authority
				Section and sub-section of the Income-tax Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)

3. Demand recovered, as per the column (11) of the Table above, shall be refunded to the declarant, subject to the conditions under sub-rule (2) of the rule 11UE and the provisions of the Act, without any interest as per the provisions of the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act, attachments, if any, the details whereof are provided in column (13) of the Table, shall be revoked and appeals or applications or petitions or proceeding, if any, filed by any income-tax authority or any other person representing the Republic of India with respect to the specified orders, as per column (2) of the Table, shall be withdrawn or intimation shall be sent to the concerned person, on the issue of Form No. 4, as per the procedure provided in sub-rule (16) of rule 11UF. Further, no interest under section 244A of the Act will be payable to the declarant as per the provisions of sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act.

Certificate No…….

Place……
Date

…………….
(Principal Commissioner/Commissioner of Income-tax) ]

Form No. : 3

¹[FORM NO. 3
[See rule 11UF]
Intimation for Withdrawal under sub-rule (3) of rule 11UF of the Income- tax Rules, 1962

To,

The Principal Commissioner/Commissioner

Sir/Madam,

I…(name in block letters) son/daughter of…………………………………………… designation………………… .and nationality …………………………………………………. .and related passport number…(hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number………………………………… (see Note 1) on behalf of……………………………. . (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ……………………………………………. . and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be, hereby confirm that the declarant has received an order in Form No. 2 dated_______

Pursuant thereto, I confirm that the pending appeals or applications or petitions, arbitration, conciliation, mediation, claims or other proceeding, if any, as referred in Part D, Part F, Part G, Part I and Part M of the undertaking in Form No. 1 dated…… have been irrevocably, on a with prejudice basis, withdrawn or discontinued and are not being pursued. The evidence of action taken in this regard are enclosed herewith.

Place…………..
Date……………

………………………….
Signature/Verification

Attachments

1. Attach the Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking.

2. Attach the evidence of action taken as referred above.

VERIFICATION

Verified that the contents of this intimation are true to the best of my knowledge and belief. No part of the intimation is false and nothing has been concealed or misstated therein.

Verified at….. place………. on this the……… day…………. of…. month……… ,…year……….

Place…………..
Date……………

………………………….
Signature/Verification

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the interested party are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking and such Board resolution or legal authorisation shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the interested party; and

(b) record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.]

Form No. : 3AA

[Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AA was inserted by the IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003 and later on amended by the IT (Fifteenth Amdt.) Rules, 2004, w.e.f. 1-4-2005.]

Form No. : 3AAA

[Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AAA was inserted by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987 and later on amended by the IT (Ninth Amdt.) Rules, 1987 and IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003.]

Form No. : 3AB

[Omitted by the IT (Thirty-second Amdt.) Rules, 1999, w.e.f. 19-11-1999. Earlier, Form No. 3AB was inserted by the IT (Amdt.) Rules, 1978 and amended by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987.]

¹ Inserted by the Income-tax (Thirty-first Amendment) Rules, 2021, w.e.f. 1-10-2021.

Tax Reference Tables

Deductions allowable to tax payer

Tax Tutorials

Taxability of income of charitable or religious trusts

A charitable and religious trust is taxable in accordance with the provisions of Section 11 to Section 13. Section 11 provides for exemption in respect of income derived from property held under trust for charitable or religious purposes to the extent to which such income is applied or accumulated during the previous year for such purposes. The exemption is allowed on fulfilment of conditions specified in Section 11, Section 12, Section 12A, Section 12AA/12AB, and Section 13 of the Income-tax Act.

Meaning of ‘Charitable Purpose’

Section 2(15) of the Income-tax Act provides an inclusive definition of ‘charitable purpose’. It includes the following:

(a) Relief of the Poor;

(b) Education;

(c) Yoga;

(d) Medical Relief;

(e) Preservation of the environment (including watersheds, forests, and wildlife);

(f) Preservation of monuments or places or objects of artistic or historic interest; and

(g) Advancement of any other object of general public utility.

The advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of any activity in the nature of trade, commerce or business (or any activity of rendering any service in relation to any trade, commerce or business) for a cess or fee or any other consideration.

This exception, however, does not apply if such activity is undertaken in the course of the actual carrying out of such advancement of any other object of general public utility and the aggregate receipts from such activity during the previous year, do not exceed 20% of the total receipts of such trust during that previous year.

Registration of Trust

The income of a trust shall not be exempt under Section 11 unless it has obtained registration under Section 12AA/12AB. The person in receipt of the income is required to make an application for registration of trust in the prescribed form. The process of registration up to 31-03-2021 is governed by Section 12AA. A new Section 12AB has been inserted with effect from 01-04-2021 which lays down the new process to obtain registration and the period for which such registration shall be granted.

The registration of trusts or institutions shall be required in the following circumstances:

Trust registered under old Section 12A/12AA

The trusts or institutions that had been granted perpetual registration before 01-04-2021 are required to make an application for re-registration under the new scheme of registration under Section 12AB. The registration obtained under Section 12AB shall remain valid for a period of 5 years.

A trust/institution has to make an online application in Form 10A for registration within 3 months from the date on which the provision comes into force. The due date for filing an application for registration has been extended multiple times, and the latest due date is 30-06-2024.

The order of registration shall be passed by the Commissioner within 3 months from the end of the month in which the application for registration is received.

Renewal of Registration

Trusts or institutions are registered under Section 12AB for a period of 5 years. Where the existing registration is due to expire, the trust or institution shall apply for renewal of registration at least six months prior to the completion of the 5 years.

Note: For trusts or institutions whose total income before exemption does not exceed Rs.5 crores in each of the two previous years preceding the year of application, the validity of registration shall be 10 years.

The Finance (No. 2) Act 2024 has amended Section 10(23C) and Section 12A to shift the approval-based category of exemption under Section 10(23C) to registration-based exemption under Section 12AB. Therefore, the trusts or institutions previously approved under Section 10(23C) (iv), (v), (vi), or (via) whose registration is due for renewal on or after 01-10-2024 are now eligible to apply for registration under Section 12A, subject to similar conditions.

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Conversion of provisional registration into regular registration

The trust or institution provisionally registered under Section 12AB shall be required to convert such provisional registration into normal registration by filing an application in Form 10AB at least 6 months before the expiry of the period of the provisional registration or within 6 months of commencement of its activities, whichever is earlier.

After the amendment by the Finance (No. 2) Act 2024, the trusts or institutions provisionally approved under Section 10(23C) (iv), (v), (vi), or (via) whose registration is due for conversion on or after 01-10-2024, are now eligible to apply for registration under Section 12A, subject to similar conditions.

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Registration of trust whose registration has become inoperative

The registration under Section 12AB shall become inoperative if approval is obtained under Section 10(23C) or the institution is notified under Section 10(23EA), 10(23EC), 10(23ED) or Section 10(46) or Section 10(46A) or, the 1st day of April of the previous year relevant to the assessment year for which the exemption is claimed under Section 10 (46B). Thus, if the registration becomes inoperative, the trust or institution will not be entitled to claim an exemption under Section 11 or 12.

The trust or institution, whose registration has become inoperative may apply to get its registration again operative under Section 12AB. The application for registration in such cases shall be made at least 6 months before the assessment year from which the said registration is sought to be made operative. Once the registration becomes operative, the trust or institution will not be entitled to claim an exemption under Section 10(23C)/10(23EA)/10(23EC)/10(23ED)/10(46)/10(46A)/10(46B).

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Registration in conformity with the modified objects

If the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, then such trusts or institutions are required to make an application for fresh registration under this provision. Application for fresh registration in such cases is required to be made within 30 days from the date of adoption or modification of objects of such trust or institution.

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Provisional registration

(a) until 30-09-2023

The new trusts or institutions applying on or before 30-09-2023 for registration under Section 12AB must make the application for provisional registration even if such trusts or institutions have commenced the activities. Subsequently, such trusts or institutions have to convert their provisional registration into regular registration.

The application for provisional registration shall be filed in Form 10A at least 1 month before the commencement of the previous year relevant to the assessment year from which the registration is sought. Such provisional registration shall be valid for a period of 3 years. The trust or institution shall subsequently file an application for conversion of provisional registration into regular registration in Form 10AB at least 6 months before the expiry of the provisional registration period or within 6 months of the commencement of its activities, whichever is earlier.

(b) on or after 01-10-2023

The new trust or institution applying on or after 01-10-2023 shall file an application for provisional registration only if it has not commenced its activities. The trust or institution need not apply for provisional registration if it has commenced activities.

The application for provisional registration shall be filed at least 1 month before the commencement of the previous year relevant to the assessment year from which the registration is sought. Such provisional registration shall be valid for a period of 3 years. The trust or institution shall subsequently file an application for conversion of provisional registration into regular registration at least 6 months before the expiry of the provisional registration period or within 6 months of the commencement of its activities, whichever is earlier.

The order of registration shall be passed by the Commissioner within one month from the end of the month in which the application for registration was received.

Direct regular registration

Until 30-09-2023, the trust or institution has to apply for two registrations (provisional and regular) simultaneously, even if it has commenced the activities. However, on or after 01-10-2023, a trust or institution can apply directly for regular registration if it has already commenced the activities without applying for provisional registration.

The trusts or institutions satisfying the following two conditions can apply directly for regular registration:

(a) A trust/institution that has already commenced its activities.

(b) No income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of Section 10(23C)(iv)/(v)/(vi)/(via), or Section 11 or Section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities.

The Commissioner is required to pass an order granting the registration or refusing to grant the registration within 6 months from the end of the month in which the application for registration was received. W.e.f. 01-10-2024, the order has to be passed within six months from the end of the quarter in which the application was received rather than six months from the end of the month in which the application was received.

Condonation of Delay in Filing Registration Application

The Finance (No. 2) Act, 2024, inserted a proviso to Section 12A(a)(ac) w.e.f. 01-10-2024, to provide that, where the application is filed beyond the time allowed in sub-clauses (i) to (vi), the Principal Commissioner or Commissioner may, if he considers that there is a reasonable cause for delay in filing the application, condone such delay and such application shall be deemed to have been filed within time.

Period for which income is exempt

The exemption to a trust is generally available from the assessment year relevant to the previous year in which the application for registration is made. Hence, once the registration is granted, the exemption under Sections 11 and 12 shall be available from the assessment year immediately following the financial year in which the application is made.

In other words, the exemption shall be available prospectively from the following previous years:

(a) If the trust or institution has applied for the provisional registration at least one month before the subsequent previous year, the exemption shall be available for that subsequent previous year for which the provisional registration has been granted, provided the provisional registration has been converted into a normal registration within the prescribed time limit;

(b) If the trust or institution has applied directly for the normal registration, the exemption shall be available from the previous year in which the application for normal registration has been filed, and the registration has been granted.

Maintenance of Books of Account

To avail the exemption under Section 11 and Section 12, it is mandatory for a trust to keep and maintain books of account and other documents in such form and manner and at such place, as may be provided. This provision applies only if the total income of the charitable trust, without giving effect to the provisions of Sections 11 and 12, exceeds the maximum amount which is not chargeable to income tax in the previous year. The books of account and other documents shall be kept and maintained for a period of 10 years from the end of the relevant assessment year.

Rule 17AA prescribes the books and other documents to be kept and maintained by entities approved under Section 10(23C) or registered under Section 12AB. The books of account and other documents may be kept in the following forms:

(a) Written;

(b) Electronic form;

(c) Digital form;

(d) Print-outs of data stored in electronic or digital form; or

(e) Any other form of electromagnetic data storage device.

Audit of Accounts

Further, to avail the exemption under Section 11 and Section 12, it is mandatory for a trust to get its books of accounts audited. The books of accounts are required to be audited where the total income of the trust before exemption under section 11 and 12 exceeds the maximum amount not chargeable to tax. The accounts of the trust for that year should be audited by a Chartered Accountant. The audit report has to be furnished in Form 10B or Form 10BB at least one month prior to the due date of submission of the return of income.

Filing of return of income

The entities registered under Section 12AB are required to file the return of income under Section 139(4A) if the total income without giving effect to the provisions of Sections 11 and 12 exceeds the maximum amount which is not chargeable to Income-tax.

The exemption shall be available only if the return of income is filed within the time allowed to file the original return of income under Section 139(1) or the belated return of income under Section 139(4). Therefore, it means that the trusts or institutions cannot claim the exemption by filing an updated return of income under Section 139(8A).

Accumulation of Income

An organisation can accumulate 15 per cent of its income indefinitely. In other words, up to 15% of income can be transferred to the corpus every year. Income accumulated or set apart in excess of 15% of the income where such accumulation is not allowed under any specific provisions of the Act shall be taxable under Section 115BBI. The exemption is allowed to a trust for the income accumulated in excess of 15% subject to fulfilment of certain conditions. This exemption, however, shall be withdrawn if such conditions are not complied with by the assessee.

As per Section 11(2), if a trust is not able to apply 85 per cent of its income in a particular year, it can accumulate the shortfall to be used for religious or charitable purposes within the next 5 years. This accumulation is allowed if the assessing officer is informed about the purpose of the accumulation and the period for which the income is being accumulated. The information is to be furnished in Form 10 at least two months prior to the due date specified under Section 139(1) for furnishing the return of income for the previous year.

Even if a charitable institution is not able to utilise 85% of its income for charitable or religious purposes in India, it shall be deemed to be applied for such purposes in the situations described below. Such deemed application of income shall be considered when the institution furnishes the details electronically in Form 9A at least two months prior to the due date specified under Section 139(1) for furnishing the return of income for the previous year.

(a) Where income has not been received in the previous year;

(b) Where income could not be applied due to other reasons.

CBDT Circular No. 6/2023, dated 24-5-2023, clarified that the benefit of deemed application and accumulation shall be available even if Forms 9A and 10 are submitted on or before the due date for filing the return under Section 139(1).

Taxation of income accumulated u/s 11(2)

The circumstances in which the exemption for the accumulated amount under section 11(2) shall be withdrawn and the year in which such amount shall be taxable have been mentioned below:

(a) If the amount is applied for purposes other than religious or charitable or ceases to be accumulated or set apart for application to religious or charitable purposes. It shall be deemed to be the income of the previous year in which it is so applied or ceases to be so accumulated or set apart.

(b) If it ceases to remain invested in the statutory form of investment specified under Section 11(5). It shall be deemed to be the income of such person of the previous year in which it ceases to remain so invested or deposited.

(c) If it is not utilised for the purpose for which it is so accumulated within the allowed period of 5 years. It shall be deemed to be the income of such person of the previous year being the last previous year of the period, for which the income is accumulated or set apart but not utilised for the purpose for which it is so accumulated or set apart.

(d) It is credited or paid to any other trust or institution registered under Section 12AA/12AB or any other fund, institution, trust, hospital, university or other educational institution, or hospital or any other medical institution referred under Section 10(23C)(iv), (v), (vi) and (via). It shall be deemed to be the income of such person of the previous year in which it is credited or paid to such trust, or institution.

The deemed income arising in the above circumstances shall be taxable under Section 115BBI.

Utilisation of income accumulated u/s 11(2)

The amount so accumulated by the trust shall be utilised for the charitable and religious purposes for which it has been created. Until its utilisation, the amount shall be invested in the statutory forms as specified in Section 11(5). Any use of the accumulated funds for any other purpose or if it is not utilised at all, the exemption allowed in the year of accumulation shall be withdrawn.

Where it is beyond the control of the assessee trust or institution to spend the income for which it was accumulated, the Assessing Officer may allow the trust to apply the income so accumulated for any other religious or charitable purposes provided such other purposes are in conformity with the objects of the trust. In such cases, the exemption, granted to the assessee, cannot be withdrawn and the provisions of Section 11(2) will continue to apply.

Statutory form of investment or deposit [Section 11(5) and Rule 17C]

The fund shall be invested or deposited in the following permissible modes:

(a) Immovable property;

(b) Investment in Government Savings Certificates;

(c) Deposit in any Post Office Savings Bank Account;

(d) Deposit in any account with any scheduled bank or a cooperative bank (including a cooperative land mortgage bank or cooperative land development bank);

(e) Investment in units of UTI;

(f) Investment in Central Government or State Government Securities;

(g) Investment in debentures of any corporate body, the principal whereof and the interest whereon are guaranteed by the Central or a State Government;

(h) Investment or deposit in any public sector company. It is to be noted that if the company ceases to a public sector company subsequent to investment or deposit, the investment in shares will be considered as valid for 3 years from the date the company ceases to be a public sector company. Any other investment or deposit will be considered valid until the company repays them.

(i) Investment or deposits in any bonds issued by a financial corporation engaged in providing long-term funds for industrial development in India, if the corporation is eligible for deduction under Section 36(1)(vii);

(j) Investment or Deposits in any bonds issued by any public sector company carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, provided the company is eligible to claim deduction under Section 36(1)(viii);

(k) Deposits with a public sector company or investment in any bonds issued by a public sector company providing long-term finance for urban infrastructure in India.

(l) Deposits with IDBI;

(m) Investment in the units issued under any scheme of mutual fund;

(n) Investment in any transfer of deposit to the Public Account of India;

(o) Deposits with authority constituted in India under any law for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;

(p) Investment by way of acquiring equity shares of a depository as defined in section 2(1)(e) of the Depositories Act, 1996;

(q) Investment in certain securities by a recognised stock exchange;

(r) Investment by way of acquiring equity shares of an incubatee by an incubator;

(s) Investment by way of acquiring shares of National Skill Development Corporation;

(t) Investment in debt instruments issued by any infrastructure finance company registered with the RBI;

(u) Investment in ‘stock certificate’ as defined in paragraph 2(c) of the Sovereign Gold Bonds Scheme, 2015;

(v) Investment made by a person authorised under section 4 of the Payment and Settlement Systems Act, 2007 in the equity share capital or bonds or debentures of a company:

• • Which is engaged in operations of retail payments system or digital payments settlement or similar activities in India and abroad and is approved by the RBI for this purpose; and
  • In which at least 25% of equity shares are held by the National Payments Corporation of India.

(w) Investment made by a person authorised under section 4 of the Payment and Settlement Systems Act, 2007 in the equity share capital or bonds or debentures of Open Network for Digital Commerce Ltd, being a company incorporated under section 7(2) read with section 8(1) of the Companies Act, 2013, for participating in network-based open protocol models which enable digital commerce and inter-operable digital payments in India.

(x) Investment by way of acquiring units of POWERGRID Infrastructure Investment Trust.

Corpus Donation

Any voluntary contributions received by a trust or an institution, created wholly for charitable or religious purposes, with a specified direction (corpus donations) that they shall form part of the corpus of the trust or institution shall not be included in the total income. The corpus donation shall be invested or deposited in one or more of the forms or modes specified in Section 11(5) maintained specifically for such corpus.

Thus, the corpus donation received by an organisation will not be treated as exempt income if it is not invested or deposited in one or more of the forms or modes specified in Section 11(5) maintained specifically for such corpus.

Voluntary contribution for renovation and repair of religious institutions

Where the property held under a trust or institution includes any temple, mosque, gurdwara, church or other place notified under Section 80G(2)(b), any sum received by such trust or institution as a voluntary contribution for renovation or repair of such temple, mosque, etc., may, at its option, be treated as forming part of the corpus of the trust or the institution.

The option can be exercised subject to the fulfilment of the following conditions:

(a) The trust or institution applies such corpus only for the purpose for which the contribution was made;

(b) Such corpus is not utilised for making contributions or donations to any person;

(c) The corpus is maintained in a manner that is separately identifiable; and

(d) The corpus is invested or deposited in the forms specified in Section 11(5).

If the above conditions are violated, the amount of exempt corpus donation shall be deemed to be the income of the institution of the previous year during which the violation took place.

Anonymous Donation

‘Anonymous Donation’ means any voluntary contribution where the person receiving such contribution does not maintain a record of the identity of the donor indicating his name, address, and such other particulars as may be prescribed. The anonymous donations are taxable in the hands of specified trusts (except a religious trust) and institutions only if it exceeds higher of the following limit:

(a) Rs. 1 lakh; or

(b) 5% of total donation received.

The tax shall be levied only on the amount which exceeds higher of the above-referred limit. Anonymous donations are chargeable to tax at the rate of 30% (plus Surcharge and Health & Education Cess).

The exemptions under section 11 are not available to the taxable portion of anonymous donations and they are to be taxed as per the provisions of Section 115BBC. The taxable anonymous donations shall not be subject to 85% application for charitable purposes. However, exempted portions of anonymous donations shall be subject to 85% application for charitable purposes.

Merger of Trust

The Finance (No. 2) Act 2024 inserted a new Section 12AC to facilitate the merger of charitable trusts under the exemption regimes of Sections 10(23C) and 12AB with other trusts or institutions having similar objectives without the imposition of exit tax provisions.

If any trust or institution registered under Section 12AB or approved under sub-clauses (iv), (v), (vi), or (via) of Section 10(23C) merges with another trust or institution, the provisions of Chapter XII-EB shall not apply, provided the following conditions are met:

(a) The other trust or institution has the same or similar objects as the other trust or institution;

(b) The other trust or institution is registered under Section 12AA or Section 12AB or approved under sub-clauses (iv), (v), (vi), or (via) of Section 10(23C);

(c) The merger complies with conditions that may be prescribed by rules.

Taxability of Accreted Income

Income-tax Act provides for the levy of tax on accreted income of a specified person. Such tax is levied to ensure that the benefit conferred to a charitable trust over the years by way of tax exemption is not misused by converting it into a non-charitable organization. The tax on accreted income is levied in the following circumstances:

(a) If a trust is converted into any form which is not eligible for registration under Section 12AA or Section 12AB or approval under sub-clause (iv)/(v)/(vi)/(via) of Section 10(23C);

(b) If a trust is merged with an entity which is not having similar objectives and is not registered under Section 12AA or Section 12AB or approved under sub-clause (iv)/(v)/(vi)/(via) of Section 10(23C);

(c) In case of dissolution, the trust fails to transfer all its assets to any other trust or institution registered under Section 12AA or Section 12AB or approved under sub-clause (iv)/(v)/(vi)/(via) of Section 10(23C) within 12 months from the end of the month in which the dissolution takes place.

When is a specified trust or institution deemed to be converted?

A specified trust or institution shall be deemed to have been converted into any form not eligible for registration under Section 12AA or Section 12AB or approval under Section 10(23C) in the following cases:

(a) If registration granted to it under Section 12AA or Section 12AB or approval under Section 10(23C) has been cancelled; or

(b) If the specified person has modified its objects which do not conform to the conditions of registration or approval and it:

• • has not applied for fresh registration under Section 12AA or Section 12AB or approval under Section 10(23C);
  • has filed an application for fresh registration under Section 12AA or Section 12AB or approval under Section 10(23C), but the said application has been rejected.

(c) If any trust or institution fails to make an application under Section 10(23C) or Section 12A(1)(ac) for:

• • Re-registration/re-approval;
  • Conversion of provisional registration/approval to regular registration/approval;
  • Renewal of registration/approval within the specified period.

Calculation of accreted income

Accreted income shall be the amount of aggregate fair market value (FMV) of the total assets of the specified trust or institution as reduced by the total liability as on the specified date. The specified date shall be the following:

1. the date of the order cancelling the registration under Section 12AAor Section 12AB, or approval under Section 10(23C) as the case may be;

2. the date of adoption or modification of any object;

3. the last date for making an application for registration or approval expires;

4. the date of merger with an entity which is not having similar objectives and is not registered under Section 12AAor Section 12AB or approved under Section 10(23C);

5. the date of dissolution where the specified trust or institution fails to transfer all its assets to any other registered trust or institution.

Payment of Tax

The tax on accreted income shall be levied at the maximum marginal tax rate and this tax is in addition to income-tax chargeable in the hands of a specified person. The specified trust or institution shall be liable to pay the tax on accreted income to the credit of the Central Government within 14 days from the specified date.

If the specified trust or institution fails to pay the tax on the accreted income within the specified time, simple interest at the rate of 1% for every month or part thereof on the amount of such tax shall be charged for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.

Specified income under Section 115BBI

Exemption under Section 11 is available to a trust in respect to the income applied for charitable or religious purposes in India. If the income is applied for purposes other than religious or charitable purposes, it shall be taxable under Section 115BBI. Section 115BBI provides a special rate to tax the following specified income of a specified charitable institution:

(a) Income accumulated or set apart in excess of 15% of the income where such accumulation is not allowed under any specific provisions of the Act;

(b) Deemed income as referred to in Section 11(1B) [option is exercised but the income is not applied in the year of receipt or immediately following the year of receipt or accrual];

(c) If accumulated income is applied for purposes other than religious or charitable purposes or ceases to be accumulated or set apart for application to religious or charitable purposes;

(d) If the amount is applied for purposes other than the objects of the institution approved under Section 10(23C)(iv), (v), (vi) and (via) or ceases to be accumulated or set apart for application thereto;

(e) If accumulated income ceases to remain invested in the statutory form of investment specified under Section 11(5);

(f) If it is not utilised for the purpose for which it is so accumulated within the allowed period of 5 years;

(g) If accumulated income is credited or paid to any other trust or institution registered under Section 12AA/12AB or approved under Section 10(23C)(iv), (v), (vi) and (via);

(h) any income which is not exempt under Section 10(23C) on account of investment in impermissible mode as referred to in Section 11(5);

(i) any income which is not exempt under Section 11/12 on account of investment in impermissible mode as referred to in Section 11(5);

(j) any income which is not exempt under Section 10(23C) on account of its application for the benefit of any interested person;

(k) any income which is not exempt under Section 11/12 on account of its application for the benefit of any interested person;

(l) any income which is not excluded from total income due to its application towards charitable purposes outside India.

The aggregate of the specified income shall be charged to tax at the rate of 30% plus applicable surcharge and cess. Other income (not being a specified income) shall be taxed as per the tax rates applicable to the entity and the nature of income, as the case may be.

Cancellation of registration

The registration can be cancelled by the Principal Commissioner (PCIT) or Commissioner (CIT). The cancellation order, or an order refusing to cancel the registration, shall be passed before the expiry of 6 months. Such period of 6 months shall be calculated from the end of the quarter in which the first notice is issued by the PCIT or CIT calling for any document, information, or making any inquiry. The registration can be cancelled in any of the following situations:

PCIT/CIT notices the occurrence of the specified violation

The cancellation proceedings can be initiated if the PCIT/CIT has noticed the occurrence of a specified violation, and the violation need not be noticed only upon assessment. If the CIT independently concludes that there has been a specified violation, he can suo moto take cognizance of such violation even before the assessment by the Assessing Officer. The following shall be considered as ‘Specified Violation’:

(a) If any income derived from a property held under trust, wholly or in part, has been applied other than for the objects of the trust or institution.

(b) If the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives.

(c) If separate books of account are not maintained by the trust or institution in respect of the business, which is incidental to the attainment of its objectives.

(d) If the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public.

(e) If the trust or institution established for charitable purposes has applied any part of its income for the benefit of any particular religious community or caste.

(f) If any activity being carried out by the trust or institution is not genuine or is not being carried out in accordance with the conditions subject to which it was registered.

(g) If the trust or institution has not complied with the requirement of any other law for the time being in force as is material to achieve its objects, and the order, direction, or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality.

(h) If the application referred to in Section 12A(1)(ac) contains false or incorrect information. Hence, the PCIT/CIT can also initiate the cancellation proceedings if the registration application filed by the trust or institution contains false or incorrect information.

Reference is received from AO

If the Assessing Officer is satisfied about the specified violation committed and the PCIT or CIT has received a reference from him for any previous year under the second proviso to Section 143(3).

Selection of case with Risk Management Strategy

Cancellation proceedings can be initiated if the case is selected in accordance with Risk Management Strategy formulated from time to time.

Consequences of cancellation of registration

The following consequences may arise on the cancellation of the registration of a trust:

(a) The exemption under Sections 11 and 12 would not be available;

(b) The income will be computed under the normal provisions of the Act;

(c) Any donation or aid to an individual will be regarded as his income taxable under Section 56(2)(x) if it exceeds the threshold limit of Rs. 50,000;

(d) The approval granted under Section 80G may be cancelled;

(e) Levy of accreted tax under Section 115TD.

Withdrawal of exemption

The exemption to a charitable or religious organisation will be withdrawn if any of the provisions of Section 13 are violated, even if other conditions of Sections 11, Section 12, and Section 12A are complied with. Thus, incomes which are otherwise exempt will not be exempted if the provisions of Section 13 are contravened. An organisation, under the following circumstances, may lose its exemptions under Section 11 and Section 12:

(a) The exemption under Section 11 and Section 12 shall not be available if any part of the income from the property held under a trust for private religious purposes does not enure for the benefit of the public.

(b) If a charitable trust or institution is created for the benefit of any particular religious community or caste, no part of the income applied to such purposes is exempt from tax.

(c) If part of the income is used or applied for the benefit of an interested person, then only such part of the income shall not be considered for the exemption to the trust or institution. The exemption for the balance income shall not be withdrawn just because a part of the income is applied for the benefit of the interested person.

The following persons are categorised as ‘interested person’:

(a) The author of the trust or the founder of the institution;

(b) Any person who has made a total contribution up to the end of the relevant previous year of an amount exceeding Rs.1 lakh or his total contribution during the lifetime of the trust up to the end of previous year exceeds Rs.10 lakhs

(c) Where the author, founder or substantial contributor is a HUF, a member of the HUF;

(d) Any trustee of the trust or manager of the institution;

(e) Any relative of such author, founder, member, trustee or manager as aforesaid; and

(f) Any concern in which any of the persons referred to above [except (b)] has a substantial interest.

Meaning of Relative

Relative in relation to an individual means:

✓ Spouse of the individual;

✓ Brother or sister (and their spouses) of the individual;

✓ Brother or sister (and their spouses) of the spouse of the individual;

✓ Any lineal ascendant or descendant (and their spouses) of the individual;

✓ Any lineal ascendant or descendant (and their spouses) of the spouse of the individual;

✓ Any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.

Meaning of Substantial Interest

A person is deemed to have a substantial interest in concern if he (or along with ‘interested persons’ as mentioned above) at any time during the previous year:

✓ Holds at least 20% of equity share capital, in case of a company; or

✓ Entitled to at least 20% of profits in the case of any other concern.

When is an Interested Person deemed to be benefited?

The income or the property of the trust shall be deemed to have been applied for the benefit of an interested person in the following cases.

• • Loan without adequate interest or security
  • Use of property without adequate rent
  • Excess payment of salary
  • Inadequate remuneration for services rendered
  • Excess payment for purchases of any share, security or other property
  • Inadequate consideration for sales of any share, security or other property
  • Diversion of income or property where the aggregate value exceeds Rs. 1,000
  • Investment in concern in which an interested person has a substantial interest

(d) If funds are deposited or invested in impermissible mode, then only income to the extent of such deposit or investment shall not be considered for the exemption. The exemption for the balance income shall not be withdrawn just because funds are deposited or invested in an impermissible mode.

(e) The exemptions under Section 11 and Section 12 shall not be available in respect of the anonymous donations taxable as per the provisions of Section 115BBC.

(f) The exemptions under Section 11 and Section 12 shall not be available if the trust violates the proviso to Section 2(15). In other words, the exemption shall be withdrawn if a trust is engaged in business activity and the aggregate receipts from such activity during the previous year exceed 20% of the total receipts.

(g) The exemption shall not be available for the amount accumulated under section 11(2) if the Form 10 and Income-tax return for the corresponding financial year are not submitted within the due date prescribed under Section 139(1).

Computation of Income under special circumstances

In the following situations, the income chargeable to tax shall be computed after allowing a deduction for expenditure incurred for the objects of the institution:

(a) where the provision of section 13(8) is applicable

(b) the institution has not obtained the audit report [section 12A(1)(b)(ii)]

(c) the institution has not maintained books of account in the prescribed form [section 12A(1)(b)(i)]

(d) the institution has not furnished the return of income within the time allowed under section 139(4A) [section 12A(1)(ba)]

Income to be computed after deduction of expenditure

The income chargeable to tax due to withdrawal of exemption shall be computed after allowing a deduction for expenditure (other than capital expenditure) incurred in India for the objects of the institution. The deduction is allowable subject to the satisfaction of the following conditions:

(a) The expenditure is not from the amount of corpus donations credited in the books of account up to the end of the financial year immediately preceding the relevant previous year;

(b) The expenditure is not from any loan or borrowing;

(c) Depreciation shall not be allowed in respect of an asset whose full cost has been claimed as an application of income;

(d) The expenditure is not in the form of contribution or donation to any person.

No deduction is to be allowed of certain expenditure

The income shall be computed without deduction of the following expenditures:

(a) No deduction shall be allowed for the capital expenditure;

(b) Disallowance shall be made under Section 40(a)(ia) for the default made in deduction of tax;

(c) Disallowance shall be made Section 40A(3)/40A(3A) for the payment made in cash;

(d) No deduction shall be allowed for the expenditure not incurred in India.

It should be noted that the disallowance made of the above expenditure or allowance shall not be allowed as a deduction to the assessee under any other provision. Further, if any loss arises due to such expenditure, no set-off shall be allowed for such losses.

MCQs on Taxability of charitable or religious trusts

Q1. Which of the following purposes are covered in the definition of charitable purpose?

(a) Education

(b) Yoga

(c) Medical Relief

(d) All of the above

Correct answer – (d)

Explanation: Section 2(15) of the Income-tax Act provides an inclusive definition of ‘charitable purpose’. It includes the following:

(a) Relief of the Poor;

(b) Education;

(c) Yoga;

(d) Medical Relief;

(e) Preservation of the environment (including watersheds, forests, and wildlife);

(f) Preservation of monuments or places or objects of artistic or historic interest; and

(g) Advancement of any other object of general public utility.

Q2. Where the existing registration under Section 12AB is due to expire, the trust or institution shall apply for renewal of registration at least ________ prior to the completion of the 5 years.

(a) 6 months

(b) 3 months

(c) 1 month

(d) 15 days

Correct answer – (a)

Explanation: Trusts or institutions are registered under Section 12AB for a period of 5 years. Where the existing registration is due to expire, the trust or institution shall apply for renewal of registration at least six months prior to the completion of the 5 years. For trusts or institutions whose total income before exemption does not exceed Rs.5 crores in each of the two previous years preceding the year of application, the validity of registration shall be 10 years.

Q3. What is the time limit to convert provisional registration into normal registration where the trust or institution is provisionally registered under section 12AB?

(a) At least 6 months before the expiry of the period of the provisional registration

(b) Within 6 months of the commencement of its activities

(c) Earlier of (a) and (b)

(d) None of the above

Correct answer – (c)

Explanation: The trust or institution provisionally registered under Section 12AB shall be required to convert such provisional registration into normal registration by filing an application in Form 10AB at least 6 months before the expiry of the period of the provisional registration or within 6 months of commencement of its activities, whichever is earlier.

Q4. The exemption under sections 11 and 12 shall be available only if the return of income is filed within the time allowed to file the return of income under ________.

(a) Section 139(1)

(b) Section 139(4)

(c) Either (a) or (b)

(d) Section 139(8A)

Correct answer – (c)

The exemption under sections 11 and 12 shall be available only if the return of income is filed within the time allowed to file the original return of income under Section 139(1) or the belated return of income under Section 139(4).

Q.5. Which of the following are the statutory form of investment or deposit specified under section 11(5)?

(a) Immovable property

(b) Investment in Government Savings Certificates

(c) Deposit in any Post Office Saving Bank Account

(d) All of the above

Correct answer – (d)

Explanation: Immovable property, Investment in Government Savings Certificates, and Deposit in any Post Office Savings Bank Account all are covered in the list of statutory forms of investment or deposit specified under Section 11(5).

Q6. The anonymous donations are taxable in the hands of specified trusts (except a religious trust) and institutions only if it exceeds ________.

(a) Rs. 1 lakh

(b) 5% of the total donation received

(c) Higher of (a) and (b)

(d) Lower of (a) and (b)

Correct answer – (c)

Explanation: The anonymous donations are taxable in the hands of specified trusts (except a religious trust) and institutions only if it exceeds higher of the following limit:

(a) Rs. 1 lakh; or

(b) 5% of total donation received.

Q7. What are the consequences of cancellation of the registration of a trust?

(a) Exemption under sections 11 and 12 would not be available

(b) Income will be computed under the normal provision of the Act

(c) Approval granted under section 80G may be cancelled

(d) All of the above

Correct answer – (d)

Explanation: The following consequences may arise on the cancellation of the registration of a trust:

(a) The exemption under Sections 11 and 12 would not be available;

(b) The income will be computed under the normal provisions of the Act;

(c)Any donation or aid to an individual will be regarded as his income taxable under Section 56(2)(x) if it exceeds the threshold limit of Rs. 50,000;

(d) The approval granted under Section 80G may be cancelled;

(e) Levy of accreted tax under Section 115TD.

Q8. Which of the following persons can be categorised as interested person?

(a) Author of the trust

(b) Any trustee of the trust

(c) Any relative of such author or trustee

(d) All of the above

Correct answer – (d)

Explanation: The following persons are categorised as ‘interested person’:

(a)The author of the trust or the founder of the institution;

(b) Any person who has made a total contribution up to the end of the relevant previous year of an amount exceeding Rs.1 lakh or his total contribution during the lifetime of the trust up to the end of previous year exceeds Rs.10 lakhs.

(c) Where the author, founder or substantial contributor is a HUF, a member of the HUF;

(d) Any trustee of the trust or manager of the institution;

(e)Any relative of such author, founder, member, trustee or manager as aforesaid; and

(f) Any concern in which any of the persons referred to above [except (b)] has a substantial interest.

Q9. In which cases, an Interested Person deemed to be benefited?

(a) Loan given without adequate interest or security

(b) Excess payment of salary

(c) Inadequate remuneration for service rendered

(d) All of the above

Correct answer – (d)

Explanation: The income or the property of the trust shall be deemed to have been applied for the benefit of an interested person in the following cases.

• Loan without adequate interest or security
• Use of property without adequate rent
• Excess payment of salary
• Inadequate remuneration for services rendered
• Excess payment for purchases of any share, security or other property
• Inadequate consideration for sales of any share, security or other property
• Diversion of income or property where the aggregate value exceeds Rs. 1,000
• Investment in concern in which an interested person has a substantial interest