The Finance Bill 2024 introduces amendments to Section 11 of the Income-tax Act concerning income from property held for charitable or religious purposes. Currently, sub-section (7) of Section 11 stipulates that registration under section 12AB becomes inoperative if the trust or institution is approved or notified under specific clauses of section 10, with an option to reactivate registration under certain conditions. The proposed amendment seeks to extend this provision to include references to clauses (23EA), (23ED), and (46B) of section 10. This modification allows trusts under different regulatory regimes to opt for exemptions specified in the newly added clauses of section 10. The amendments will be effective from April 1, 2025, impacting how trusts manage their tax exemptions under the Income-tax Act.
Budget 2024: Inclusion of reference of clause (23EA), clause (23ED) and clause (46B) of section 10 in sub-section (7) of section 11
Sub-section (7) of section 11 of the Act lays down that registration under section 12AB shall become inoperative, if the trust or institution is approved / notified under clause (23C), (23EC), (46) or (46A) of section 10. Such trust or institution has a one-time option to apply to make its registration under section 12AB operative. Thus, a trust or institution may choose the provisions under which it seeks to claim exemption.
2. It is proposed to amend sub-section (7) of section 11 of the Act to include reference of clause (23EA), clause (23ED) and clause (46B) of section 10 of the Act, to enable trusts under the second regime to claim exemption under the above-noted specific clauses of section 10.
3. These amendments will take effect from the 1st day of April, 2025.
[Clause 5]
Extract of Clause 5 of Finance Bill 2024
Clause 5 of the Bill seeks to amend section 11 of the Income-tax Act relating to income from property held for charitable or religious purposes.
Sub-section (7) of the said section provides that where a trust or an institution has been granted registration under section 12AA or section 12AB or has obtained registration at any time under section 12A and the said registration is in force for any previous year, then, nothing contained in section 10 [other than clause (1), clause (23C), clause (23EC), clause (46) and clause (46A) thereof] shall operate to exclude any income derived from the property held under trust from the total income of the person in receipt thereof for that previous year.
It is proposed to amend the sub-section of the said section so as to provide the reference of clause (23EA), clause (23ED) and clause (46B) of section 10 therein.
First proviso to sub-section (7) of the said section provides that registration shall become inoperative from the date on which the trust or institution is approved under clause (23C) of section 10 or is notified under clause (23EC) or clause (46) or clause (46A) of section 10, as the case may be, or the date on which this proviso has come into force, whichever is later.
It is further proposed to amend the first proviso to said sub-section of the said section so as to provide that such registration shall become inoperative from the date on which the trust or institution is approved under clause (23C) of section 10 or is notified under clause (23EA), clause (23EC), clause (23ED), clause (46) or clause (46A) of the said section, as the case may be, or the date on which this proviso has come into force, whichever is later, or, the 1st day of April of the previous year relevant to the assessment year for which the exemption is claimed under clause (46B) of section 10.
Second proviso to sub-section (7) of the said section provides that the trust or institution, whose registration has become inoperative under the first proviso, may apply to get its registration operative under section 12AA or section 12AB subject to the condition that on doing so, the approval under clause (23C) of section 10 or notification under clause (23EC) or clause (46) or clause (46A) of section 10, as the case may be, to such trust or institution shall cease to have any effect from the date on which the said registration becomes operative and thereafter, it shall not be entitled to exemption under the respective clauses.
It is proposed to amend the said second proviso so as to provide that the trust or institution, whose registration has become inoperative under the first proviso, may apply to get its registration operative under section 12AA or section 12AB subject to the condition that on doing so, the approval under clause (23C) of section 10 or notification under clause (23EA) or clause (23EC) or clause (23ED) or clause (46) or clause (46A) of the said section, as the case may be, to such trust or institution shall cease to have any effect from the date on which the said registration becomes operative and thereafter, it shall not be entitled to exemption under the respective clauses.
These amendments will take effect from 1st April, 2025.
Proposed Amendment to section 11 of Income Tax Act, 1961 vide Finance Bill, 2024
In section 11 of the Income-tax Act, in sub-section (7), with effect from the 1st day of April, 2025,––
(a) for the words, brackets, figures and letters “other than clause (1), clause (23C), clause (23EC), clause (46) and clause (46A) thereof”, the words, brackets, figures and letters “other than clause (1), clause (23C), clause (23EA), clause (23EC), clause (23ED), clause (46), clause (46A) and clause (46B) thereof” shall be substituted;
(b) in the first proviso,––
(i) for the portion beginning with the words “is notified under” and ending with the word, brackets and figures “clause (46)”, the words, brackets, figures and letters “is notified under clause (23EA) or clause (23EC) or clause (23ED) or clause (46)” shall be substituted;
(ii) after the words “whichever is later”, the words, figures, letters and brackets “, or, the 1st day of April of the previous year relevant to the assessment year for which the exemption is claimed under clause (46B) of the said section” shall be inserted;
(c) in the second proviso,––
(i) after the words “notification under”, the words, brackets, figures and letters “clause (23EA) or” shall be inserted;
(ii) after the words, brackets, figures and letters “clause (23EC) or”, the words, brackets, figures and letters “clause (23ED) or” shall be inserted.
