Rationalisation of the provisions of Charitable Trust and Institutions – Budget 2023
1. Background
1.1 Income of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 of the Act or any trust or institution registered u/s 12AA or 12AB of the Act is exempt subject to the fulfilment of the conditions provided under various sections. The exemption to these trusts or institutions is available under the two regimes-
(i) Regime for any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 of the Act (hereinafter referred to as trust or institution under first regime); and
(ii) Regime for the trusts registered under section 12AA/12AB of the Act (hereinafter referred to as trust or institution under the second regime).
1.2 Section 12A of the Act, inter alia, provides for procedure to make application for the registration of the trust or institution to claim exemption under section 11 and 12 of the Act. Section 12AB of the Act is the new section which comes into effect from the 1st April, 2021.
2. Depositing back of corpus and repayment of loans or borrowings
2.1 Under the existing provisions of the Act, corpus donations received by trusts and institutions under both regimes are exempt as follows:
a) Explanation 1 to the third proviso to clause (23C) of section 10 of the Act provides that income of the funds or trust or institution or any university or other educational institution or any hospital or other medical institution, shall not include income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub-section (5) of section 11 of the Act maintained specifically for such corpus.
b) Clause (d) of sub-section (1) of Section 11 of the Act provides that voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution shall not be included in the total income of the trust or institution subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in subsection (5) of section 11 of the Act maintained specifically for such corpus.
c) Application out of corpus shall not be considered as application for charitable or religious purposes for the purposes of third proviso of clause (23C) of section 10 of the Act and clauses (a) and (b) of section 11 of the Act. However, when it is invested or deposited back, into one or more of the forms or modes specified in sub-section (5) of section 11 of the Act maintained specifically for such corpus, from the income of the previous year, such amount shall be allowed as application in the previous year in which it is deposited back to corpus to the extent of such deposit or investment.
d) Application from loans and borrowings shall not be considered as application for charitable or religious purposes for the purposes of third proviso of clause (23C) of section 10 of the Act and clauses (a) and (b) of section 11 of the Act. However, when loan or borrowing is repaid from the income of the previous year, such repayment shall be allowed as application in the previous year in which it is repaid to the extent of such repayment.
2.2 While implementing the recent changes vide the Finance Act, 2021 to the provisions related to corpus and loan or borrowing, it has come to the notice that application from corpus or loan or borrowings have already been claimed as application prior to 01.04.2021. Hence, allowing such amount to be application again as investment or reposting back in corpus or repayment of loan or borrowing will amount to double deduction.
2.3 It was also noted that, a trust may invest or deposit back the amount in to corpus or repay the loan after many years of application from the corpus or loan and claim such repayment of loan or investment/depositing back in to corpus as application for charitable or religious purposes. Availability of indefinite period for the investment or depositing back to the corpus or repayment of loan will make the implementation of the provisions quite difficult.
2.4 Further, it was noted that conditions that are required to be satisfied in the case of application for charitable or religious purposes must also be satisfied while making the application from the corpus or loan or borrowing. These conditions are as follows:
(i) Such application should not be in the form of corpus donation to another trust [twelfth proviso to clause (23C) of section 10 of the Act for the trust or institution under first regime and Explanation 2 to sub-section (1) of section 11 of the Act for the trust or institution under second regime];
(ii) TDS, if applicable, should be deducted on such application [thirteenth proviso to clause (23C) of section 10 of the Act for the trust or institution under first regime and Explanation 3 to sub-section (1) of section 11 of the Act for the trust or institution under second regime];
(iii) Application whereby payment or aggregate of payments made to a person in a day exceeds Rs 10,000 in other than specified modes (such as cash) is not allowed (thirteenth proviso to clause (23C) of section 10 of the Act for the trust or institution under first regime and Explanation 3 to sub-section (1) of section 11 of the Act for the trust or institution under second regime);
(iv) Carry forward and set off of excess application is not allowed [Explanation 2 to clause (23C) of section 10 of the Act for the trust or institution under first regime and Explanation 5 to sub-section (1) of section 11 of the Act for the trust or institution under second regime];
(v) Application is allowed in the year in which it is actually paid [Explanation 3 to clause (23C) of section 10 of the Act for the trust or institution under first regime and Explanation to section 11 of the Act for the trust or institution under second regime];
(vi) Application should not directly or indirectly benefit any person referred to in sub-section (1) of section 13 of the Act and the income of the trust or institution should not enure any benefit to such person [twenty-first proviso to clause (23C) of section 10 of the Act for the trust or institution under first regime and clause (c) of sub-section (1) of section 13 of the Act for the trust or institution under second regime];
(vii) Application should be in India except with the approval of the Board in accordance with the provisions of clause (c) of sub-section (1) of section 11 of the Act.
2.5 In order to ensure proper implementation of both the exemption regimes, it is proposed to provide that application out of corpus or loans or borrowings before 01.04.2021 should not be allowed as application for charitable or religious purposes when such amount is deposited back or invested in to corpus or when the loan or borrowing is repaid. It is further proposed to provide that if the trust or institution invests or deposits back the amount in to corpus or repays the loan within 5 years of application from the corpus or loan, then such investment/depositing back in to corpus or repayment of loan will be allowed as application for charitable or religious purposes. It is also proposed to provide that where the application from corpus or loan did not satisfy the conditions as stated in paragraph 2.4, the repayment of loan or investment/depositing back in to corpus of such amount will not be treated as application.
2.6 In view of the above, the following amendments are proposed:
(i) insert a second proviso to clause (i) of Explanation 2 to the third proviso of clause (23C) of section 10 of the Act so as to provide that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty- first proviso to, and Explanation 2 and Explanation 3 of, clause (23C) of section 10 of the Act, at the time the application was made from the corpus;
(ii) insert third proviso to clause (i) of Explanation 2 to the third proviso of clause (23C) of section 10 of the Act so as to provide that the amount invested or deposited back shall not be treated as application for charitable or religious purposes under the first proviso unless such investment or deposit is made within a period of five years from the end of the previous year in which such application was made from corpus;
(iii) insert a fourth proviso to clause (i) of Explanation 2 to the third proviso of clause (23C) of section 10 of the Act to provide that so as to provide that nothing contained in the first proviso shall apply where application from corpus is made on or before the 31st day of March, 2021;
(iv) insert a second proviso to clause (ii) of Explanation 2 to the third proviso of clause (23C) of section 10 of the Act so as to provide that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty- first proviso to, and Explanation 2 and Explanation 3 of, clause (23C) of section 10 of the Act, at the time the application was made from loan or borrowing;
(v) insert a third proviso to clause (ii) of Explanation 2 to the third proviso of clause (23C) of section 10 of the Act to provide that the amount repaid shall not be treated as application for charitable or religious purposes under the first proviso, unless such repayment is made within a period of five years from the end of the previous year in which such application was made from loan or borrowing;
(vi) insert a fourth proviso to clause (ii) of Explanation 2 to the third proviso of clause (23C) of section 10 of the Act to provide that nothing contained in the first proviso shall apply where application, from any loan or borrowing is made on or before the thirty first day of March, 2021;
(vii) insert a second proviso to clause (i) of Explanation 4 to sub-section (1) of section 11 of the Act so as to provide that the provisions of the first proviso shall apply only if there was no violation of the conditions, specified in clause (c) of, and Explanations 2, 3 and 5 of, sub-section (1) and Explanation to section 11 of the Act and clause (c) of sub-section (1) of section 13 of the Act, at the time the application was made from the corpus;
(viii) insert a third proviso to clause (i) of Explanation 4 to sub-section (1) of section 11 of the Act so as to provide that the amount invested or deposited back shall not be treated as application for charitable or religious purposes under the first proviso unless such investment or deposit is made within a period of five years from the end of the previous year in which such application was made from corpus;
(ix) insert a fourth proviso to clause (i) of Explanation 4 to sub-section (1) of section 11 of the Act so as to provide that nothing contained in the first proviso shall apply where application from corpus is made on or before the 31st day of March, 2021;
(x) insert a second proviso to clause (ii) of Explanation 4 to sub-section (1) of section 11 of the Act so as to provide that the provisions of the first proviso shall apply only if there was no violation of the conditions, specified in clause (c) of, and Explanations 2, 3 and 5 of, sub-section (1) and Explanation to section 11 of the Act or clause (c) of sub-section (1) of section 13 of the Act, at the time the application was made from loan or borrowing;
(xi) insert a third proviso to clause (ii) of Explanation 4 to sub-section (1) of section 11 of the Act so as to provide that the amount repaid shall not be treated as application for charitable or religious purposes under the first proviso unless such repayment is made within a period of five years from the end of the previous year during which such application was made form loan or borrowing;
(xii) insert a fourth proviso to clause (ii) of Explanation 4 to sub-section (1) of section 11 of the Act so as to provide that nothing contained in the first proviso shall apply where application from any loan or borrowing is made on or before the thirty first day of March, 2021.
2.7 These amendments will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-24 and subsequent assessment years.
[clauses 5 & 7]
3. Treatment of donation to other trusts:
3.1 The income of the trusts and institutions under both regimes is exempt subject to the fulfilment of certain conditions. Some of such conditions are as follows:
a) at least 85% of income of the trust or institution should be applied during the year for the charitable or religious purposes to ensure bare minimum application for charitable or religious purposes.
b) Trusts or institutions are allowed to either apply mandatory 85% of their income either themselves or by making donations to the trusts with similar objectives.
c) If donated to other trusts or institutions, the donation should not be towards corpus to ensure that the donations are applied by the donee trust or institutions.
d) Thus, every trust or institution under both the regimes is allowed to accumulate 15% of its income each year.
3.2 Instances have come to the notice that certain trusts or institutions are trying to defeat the intention of the legislature by forming multiple trusts and accumulating 15% at each layer. By forming multiple trusts and accumulating 15% at each stage, the effective application towards the charitable or religious activities is reduced significantly to a lesser percentage compared to the mandatory requirement of 85%.
3.3 In order to ensure intended application toward charitable or religious purpose, it is proposed that only 85% of the eligible donations made by a trust or institution under the first or the second regime to another trust under the first or second regime shall be treated as application only to the extent of 85% of such donation. Accordingly, the following amendments are proposed:
a) insert clause (iii) in Explanation 2 to the third proviso of clause (23C) of section 10 of the Act to provide that any amount credited or paid out of income of any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 of the Act, other than the amount referred to in the twelfth proviso, to any other fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 of the Act or trust or institution registered under section 12AB of the Act, as the case may be, shall be treated as application for charitable or religious purposes only to the extent of eighty-five per cent. of such amount credited or paid;
b) insert clause (iii) in Explanation 4 to sub-section (1) of section 11 of the Act to provide that any amount credited or paid, other than the amount referred to in Explanation 2 to the said sub-section, to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 of the Act or other trust or institution registered under section 12AB of the Act, as the case may be, shall be treated as application for charitable or religious purposes only to the extent of eighty-five per cent. of such amount credited or paid.
3.4 These amendments will take effect from 1st April, 2024 and will accordingly apply in relation to the assessment year 2024-25 and subsequent assessment years.
[clauses 5 & 7]
4. Omission of redundant provisions related to roll back of exemption
4.1 There are roll back provisions for the trust or institutions under the second regime. Subsection (2) of section 12A of the Act provides that where an application for registration under section 12AB of the Act has been made, the exemption shall be available with respect to the assessment year relevant to the financial year in which the application is made and subsequent assessment years.
4.2 Second proviso to sub-section (2) of section 12A of the Act provides that where registration has been granted to the trust or institution under section 12AA or section 12AB of the Act, then, the provisions of sections 11 and 12 of the Act shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration if the objects and activities of such trust or institution remain the same for such preceding assessment year.
4.3 Third proviso to sub-section (2) of section 12A of the Act provides that that no action under section 147 of the Act shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year.
4.4 Fourth proviso to sub-section (2) of section 12A of the Act provides that provisions contained in the second and third proviso to sub-section (2) of section 12A of the Act shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA of the Act or section 12AB of the Act.
4.5 Second, third and fourth proviso to sub-section (2) of section 12A of the Act discussed above have become redundant after the amendment of section 12A of the Act by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Now the trusts and institutions under the second regime are required to apply for provisional registration before the commencement of their activities and therefore there is no need of roll back provisions provided in second and third proviso to sub-section (2) of section 12A of the Act.
4.6 With a view to rationalise the provisions, it is proposed to omit the second, third and fourth proviso to sub-section (2) of section 12A of the Act.
4.7 These amendments will take effect from 1st April, 2023.
[clause 8]
5. Combining provisional and regular registration in some cases
5.1 Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 amended the provisions related to application for registration by amending the first and second proviso to clause (23C) of section 10 of the Act, clause (ac) of sub-section (1) of section 12A of the Act and first and second proviso to sub-section 5 of section 80G of the Act. The amended provisions, inter-alia, provide the following:
a) New trusts or institutions under both regimes as well under section 80G regime need to apply for the provisional registration/approval at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration/approval is sought. Such provisional registration/ approval shall be valid for a period of 3 years.
b) Provisionally registered/approved trusts or institutions under both regimes and section 80G regime will again need to apply for regular registration/approval at least six months prior to expiry of period of the provisional registration/ approval or within six months of the commencement of activities, whichever is earlier. Regular registration/approval shall be valid for a period of 5 years.
c) The trusts and institutions under both regimes and section 80G regime will need to apply at least six months prior to the expiry of regular registration/approval.
5.2 It has also been brought to the notice that trusts and institutions under both the regimes are facing the following difficulties:
a) Trusts or institutions formed or incorporated during the previous year are not able to get the exemption for that year in which they are formed or incorporated since they need to apply one month before the previous year for which exemption is sought.
b) Besides trusts or institutions, where activities have already commenced, are required to apply for two registrations (provisional and regular) simultaneously.
5.3 In order to ensure rationalisation of the provisions, it is proposed to allow for direct final registration/approval in such cases. To achieve this, following amendments are proposed:
a) The trusts and institutions under the first regime shall be allowed to make application for the provisional approval only before the commencement of activities under proposed sub-clause (A) of clause (iv) of the first proviso to clause (23C) of section 10 of the Act.
b) Similarly trusts and institutions under the second regime shall be allowed to make application for the provisional registration only before the commencement of activities under proposed item (A) of sub-clause (vi) of clause (ac) of sub-section (1) of section 12A of the Act.
c) Similarly trusts and institutions under section 80G regime shall be allowed to make application for the provisional approval only before the commencement of activities under proposed sub-clause (A) of clause (iv) of the first proviso to sub-section (5) of section 80G of the Act.
d) The trusts and institutions under first regime, which have already commenced their activities, shall make application for a regular approval under sub-clause (B) of clause (iv) of the first proviso to clause (23C) of section 10 of the Act.
e) The trusts and institutions under second regime, which have already commenced their activities, shall make application for a regular registration under item (B) of sub-clause (vi) of clause (ac) of sub-section (1) of section 12A of the Act.
f) The trusts and institutions under section 80G regime, which have already commenced their activities, shall make application for a regular approval under the proposed sub-clause (B) of clause (iv) of the first proviso to subsection (5) of section 80G of the Act.
g) Such application shall be examined by the Principal Commissioner or Commissioner as per the procedure provided under clause (ii) of the second proviso to clause (23C) of section 10 of the Act for the trusts and institutions under the first regime, under clause (b) of sub-section (1) of section 12AB of the Act for the trusts and institutions under the second regime and under clause (ii) of the second proviso to sub-section (5) of section 80G of the Act.
h) Where the Principal Commissioner or Commissioner is satisfied about the objects and genuineness of the activities and compliance of other requirements provided in law, registration or approval in such cases shall be granted for 5 years.
i) The Principal Commissioner or the Commissioner shall pass and order granting or rejecting such applications within 6 months calculated from the end of the month in which such application was received.
5.4 These amendments will take effect from 1st October, 2023.
[clauses 5, 8, 9 & 40]
6. Specified violations under section 12AB and fifteenth proviso to clause (23C) of section 10
6.1 Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 amended the provisions related to application for registration by amending the first and second proviso to clause (23C) of section 10 of the Act, and clause (ac) of sub-section (1) of section 12A of the Act. Now the new trusts are required to apply for the provisional registration/approval which is valid for a period of 3 years or till six months from the commencement of activities whichever is earlier. The trusts and institutions under both regimes, already registered or approved, were required to furnish the application in form 10A for re-registration/approval. The process of granting the provisional approval/ registration for the new trusts and re-registration/approval for the trusts already registered is automated. Application is filed by the trust or institution on e-filing portal and provisional approval/registration or the approval/registration in such cases is granted in an automated manner without verification.
6.2 It has come to the notice that in some cases the form furnished by the trusts for provisional approval/registration and for re-registration/approval are defective and since the process of registration/approval/provisional registration/approval is automated, registration has been granted by the CPC. At present the approval/registration and the provisional approval/registration of the trusts can be cancelled by the PCIT/CIT for certain specified violations.
6.2 In order to rationalise the provisions, it is proposed to,
a) insert clause (g) in Explanation 2 to the fifteenth proviso of clause (23C) of section 10 of the Act to provide that the “specified violation” shall also include the case where the application referred to in the first proviso is not complete or it contains false or incorrect information.
b) similarly, it is proposed to insert clause (g) in Explanation to sub-section (4) of section 12AB of the Act to provide that “specified violation” shall also include the case where the application referred to in clause (ac) of subsection (1) of section 12A of the Act is not complete or it contains false or incorrect information.
6.3 These amendments will take effect from 1st April, 2023.
[clauses 5 & 9]
7. Trusts or institutions not filing the application in certain cases
7.1 Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 amended the provisions related to application for registration by amending the first and second proviso to clause (23C) of section 10 of the Act, clause (ac) of sub-section (1) of section 12A of the Act. The amended provisions provide the following:
a) All the existing trusts and institutions under the first and second regime are required to apply for re-registration/approval on or before 31.03.2021. The due date for re-registration/approval has been extended by the Central Board of Direct Taxes till 25.11.2022 vide Circular No. 22 of 2022 dated 01.11.2022. Such re-registration/approval shall be valid for a period of 5 years.
b) New trusts and institutions under the first and second regime are required to apply for the provisional registration/approval at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration/approval is sought. Such provisional registration/approval shall be valid for a period of 3 years.
c) Provisionally registered/approved trusts and institutions under the first and second regime will again need to apply for regular registration/approval at least six months prior to expiry of the period of the provisional registration/approval or within six months of the commencement of activities, whichever is earlier.
d) The trusts and institutions under the first and second regime are required to apply at least six months prior to the expiry of re-registration/approval.
7.2 Instances have come to the notice where certain trusts and institutions under the first and second regime have not applied for the regular registration after taking the provisional registration. Further some trusts and institutions under the first and second regime have not applied for the re-registration/approval. Further, there may be possible instances where the trusts and institutions under the first or second regime will not apply for re-registration after the expiry of 5 years/3 years. This will result in the following unintended consequences:
a) Once a trust or institution under the first or second regime enters in-to exemption regime, it is allowed to exit on payment of tax at the rate of maximum marginal rate on its accreted income (difference between the fair market value of assets and liabilities). This is because of the reason that the income of the trust or institution has been exempted from tax and the accreted income of the trust represents the income on which tax has not been paid and appreciation thereof.
b) By not applying for re-registration/approval or registration/approval, the trust gets an easy route to exit without payment of the tax on accreted income.
7.3 A trust or institution under the first or second regime may voluntarily wind up its activities and dissolve or may also merge with any other non-charitable institution, or it may convert into a non-charitable organization. In order to ensure that the benefit conferred over the years by way of exemption is not misused and to plug the gap in law that allowed the trusts and institutions having built up corpus/wealth through exemptions being converted into non-charitable organisation with no tax consequences, a new Chapter XII-EB consisting of Sections 115TD, 115TE and 115TF was inserted in the Act by the Finance Act, 2016.
7.4 This chapter seeks to impose a levy in the nature of an exit tax which is attracted when the organisation is converted into a non-charitable organisation or gets merged with a non-charitable organisation or a charitable organisation with dissimilar objects or does not transfer the assets to another charitable organisation.
7.5 The main elements of these provisions are:
(i) The accretion in income (accreted income) of the trust or institution is taxable on conversion of trust or institution into a form not eligible for registration under section 12 AA or section 12AB of the Act or on merger into an entity not having similar objects and registered under Section 12AA or section 12AB of the Act or on non-distribution of assets on dissolution to any charitable institution registered under section 12AA of the Act or approved under clause (23C) of section 1023C of the Act within a period of twelve months from the end of the month of dissolution.
(ii) Accreted income is the amount of aggregate of Fair Market Value (FMV) of total assets as reduced by the liability as on the specified date. The method of valuation has been prescribed in rules.
(iii)The taxation of accreted income is at the maximum marginal rate.
(iv) This levy is in addition to any income chargeable to tax in the hands of the entity.
7.6 Vide Finance Act, 2022, the provisions of section 115TD, 115TE and 115TF of the Act have been amended to make them applicable to any trust or institution under the first regime as well.
7.7 It is proposed to amend the provisions of section 115TD of the Act by inserting clause (iii) in sub-section (3) of section 115TD of the Act to provide that the provisions of Chapter XII-EB shall be applicable if any trust or institution under the first or second regime fails to make an application in accordance with the provisions of clause (i) or clause (ii) or clause (iii) of the first proviso to clause (23C) of section 10 of the Act or in accordance with sub-clause (i) or sub-clause (ii) or sub-clause (iii) of clause (ac) of subsection (1) of section 12A of the Act, within the period specified in the said clauses or sub-clauses. Upon violation of these, it shall be deemed to have been converted into any form not eligible for registration or approval in the previous year in which such period expires.
7.8 It is further proposed to amend clause (ii) of sub-section (5) of section 115TD of the Act to provide that principal officer or the trustee of the specified person, as the case may be, and the specified person shall also be liable to pay the tax on accreted income to the credit of the Central Government within fourteen days from the end of the previous year in a case referred to in clause (iii) of sub-section (3) of section 115TD of the Act;
7.9 It is also proposed to insert sub-clause (c) in clause (i) to the Explanation to section 115TD of the Act to provide that date of conversion shall also mean the last date for making an application for registration under sub-clause (i) or sub-clause (ii) or sub-clause (iii) of clause (ac) of sub-section (1) of section 12A or for making an application for approval under clause (i) or clause (ii) or clause (iii) of the first proviso to clause (23C) of section 10, as the case may be, in a case referred to in clause (iii) of sub-section (3) of section 115TD of the Act.
7.10 These amendments will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-24 and subsequent assessment years.
[clause 57]
8. Alignment of the time limit for furnishing the form for accumulation of income and tax audit report
8.1 The trusts and institutions under the first regime are required to get their accounts audited as per the provisions of clause (b) of the tenth proviso to clause (23C) of section 10 of the Act. The trusts and institutions under second regime are required to get their accounts audited as per the provisions of sub-clause (ii) of clause (b) of sub-section (1) of section 12A of the Act. The audit report under both the regimes is required to be furnished at least one month before the due date for furnishing the return of income.
8.2 Explanation 3 to the third proviso of clause (23C) of the section 10 of the Act provides that where the trust or institution under the first regime accumulates or sets apart its income, such trust or institution is required to furnish a statement in the prescribed form (Form 10) on or before the due date specified under sub-section (1) of section 139 of the Act for furnishing the return of income for the previous year.
8.3 Clause (c) of sub-section (2) of section 11 of the Act provides that where the trust or institution under the second regime accumulates or sets apart its income, such trust or institution is required to furnish a statement in the prescribed form (Form 10) on or before the due date specified under sub-section (1) of section 139 of the Act for furnishing the return of income for the previous year.
8.4 Clause (2) of Explanation 1 to sub-section (1) of section 11 of the Act provides that where the trust or institution under the second regime deems certain income to be applied, such trust or institution is required to furnish a statement in the prescribed form (Form 9A) on or before the due date specified under sub-section (1) of section 139 of the Act for furnishing the return of income for the previous year.
8.5 The due date for furnishing form 9A and form 10 is same as the due date of furnishing the return of income. The trusts are also required to furnish audit report in form 10B/10BB one month before the due date for furnishing return of income. The auditors are required to report the details of form 10/9A in the audit report. Since the due date for furnishing form 9A/10 is one month before the due date of furnishing the ITR, auditors find it difficult to report.
8.6 In order to rationalise the provisions, it is proposed to provide for filing of Form No. 10A/9A at least two months prior to the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year. Necessary amendments in this regard are proposed in,
a) clause (c) of Explanation 3 to third proviso of clause (23C) of section 10 of the Act;
b) clause (2) of Explanation 1 sub-section (1) of section 11 of the Act;
c) clause (c) of sub-section (2) of the said section 11 of the Act.
8.7 These amendments will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-24 and subsequent assessment years.
[clauses 5 & 7]
9. Denial of exemption where return of income is not furnished within time
9.1 As per the provisions of twentieth proviso to clause (23C) of section 10 of the Act, if the return of income is not furnished by a trust or institution under first regime within the time under section 139 of the Act, exemption under sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act shall not be available to such trust or institution.
a. Similarly, as per the provisions of clause (ba) of sub-section (1) of section 12A of the Act, if the return of income is not furnished by a trust or institution under the second regime within the time under section 139 of the Act, exemption under section 11, 12 of the Act shall not be available to such trust or institution.
b. Section 139 of the Act was amended by the Finance Act, 2022 providing for an option to the taxpayers to furnish updated return of income up to 2 years from the end of assessment year.
c. This resulted in unintended consequences of allowing exemption under section 11, 12 of the Act and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available to the trusts where they furnish updated return of income. Accordingly, it is proposed to clarify that the exemption under section 11, 12 and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available only if the return of income has been furnished within the time allowed under sub-section (1) or subsection (4) of section 139 of the Act.
d. Hence, it is proposed to,
a) amend the twentieth proviso of clause (23C) section 10 of the Act to provide that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139 of the Act, within the time allowed under sub-section (1) or sub-section (4) of that section.
b) amend clause (ba) of sub-section (1) of section 12A of the Act to provide that the person in receipt of the income shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139 of the Act, within the time allowed under sub-section (1) or sub-section (4) of that section.
e. These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.
[clauses 5 & 8]
Extract of relevant clause of Finance Bill 2023
Clause 5 of the Bill seeks to amend section 10 of the Income-tax Act relating to incomes not included in total income.
It is proposed to amend the Explanation to clause (4D) of the said section to give reference of the International Financial Services Centres Authority (Fund Management) Regulations, 2022 in the definition of “specified fund”.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Clause 7 seeks to amend section 11 of the Income-tax Act relating to income from property held for charitable or religious purposes.
It is proposed to amend clause (2) of Explanation 1 of sub-section (1) of the said section to provide that option by the person under the said Explanation shall be exercised at least two months prior to the due date specified under sub-section (1) of section 139 for furnishing the return of income.
It is further proposed to insert a second proviso to clause (i) of Explanation 4 of subsection (1) of the said section so as to provide that the provisions of the first proviso shall apply only if there was no violation of the conditions, specified in
(a) clause (c) and those specified in Explanations 2, 3 and 5, of the said sub-section; and
(b) in the Explanation to the said section; and
(c) in clause (c) of sub-section (1) of section 13,
at the time the application was made from the corpus.
It is also proposed to insert a third proviso to clause (i) of the said Explanation 4 so as to provide that the amount invested or deposited back shall not be treated as application for charitable or religious purposes under the first proviso unless such investment or deposit is made within a period of five years from the end of the previous year in which such application was made from corpus.
It is also proposed to insert a fourth proviso to clause (i) of the said Explanation 4 so as to provide that nothing contained in the first proviso shall apply where application from the corpus is made on or before 31st March, 2021.
It is also proposed to insert a second proviso to clause (ii) of the said Explanation 4 so as to provide that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in
(a) clause (c) and those specified in Explanations 2, 3 and 5, of the said sub-section;
(b) in the Explanation to the said section; and
(c) in clause (c) of sub-section (1) of section 13, at the time the application was made from loan or borrowing.
It is also proposed to insert a third proviso to clause (ii) of the said Explanation 4 so as to provide that the amount repaid shall not be treated as application for charitable or religious purposes under the first proviso, unless such repayment is made within a period of five years from the end of the previous year in which such application was made form loan or borrowing.
It is also proposed to insert a fourth proviso to clause (ii) of the said Explanation 4 so as to provide that nothing contained in the first proviso shall apply where application from any loan or borrowing is made on or before 31st March, 2021.
These amendments will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Clause 8 seeks to amend section 12A of the Income-tax Act relating to conditions for applicability of sections 11 and 12.
Sub-section (1) of section 12A provides the conditions for applicability of sections 11 and 12 in respect of income of any trust or institution under clauses (ac), (b) and (ba).
It is proposed to substitute sub-clause (vi) of clause (ac) of sub-section (1) of the said section so as to provide that the trust or institution, which is not covered under sub-clauses (i) to (v) of this clause, shall apply for registration where the activities of the said trust or institution have ––
(A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought;
(B) commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, 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.
This amendment will take effect from 1st October, 2023. It is further proposed to amend clause (ba) of sub-section (1) of the said section to provide that the person in receipt of the income shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under sub-section (1) or sub-section (4) of that section.
This amendment will take effect from the 1st day of April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Clause 9 seeks to amend section 12AB of the Income-tax Act relating to procedure for fresh registration.
It is proposed to amend clause (b) of sub-section (1) of the said section so as to provide that where the application is made under the item (B) of sub-clause (vi) of clause (ac) of sub-section (1) of section 12A, the Principal Commissioner or Commissioner shall follow the procedure provided under clause (b) of sub-section (1).
It is further proposed to substitute item (B) of sub-clause (ii) of clause (b) of sub-section (1) of the said section to provide that where the Principal Commissioner or Commissioner not so satisfied about the objects of the trust or institution and the genuineness of its activities and compliance of the requirements, he shall pass an order in writing,––
(I) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration;
(II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of subsection (1) of section 12A, rejecting such application,
after affording a reasonable opportunity of being heard.
It is also proposed to substitute clause (c) of sub-section (1) of the said section to provide that where the application is made under item (A) of sub-clause (vi) of clause (ac) of subsection (1) of section 12A or the 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, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution.
These amendments will take effect from 1st October, 2023.
It is also proposed to insert a new clause (g) to the Explanation to sub-section (4) of the said section so as to provide that “specified violation” shall also include the case where the application referred to in clause (ac) of sub-section (1) of section 12A is not complete or it contains false or incorrect information.
This amendment will take effect from 1st April, 2023.
Clause 40 seeks to amend section 80G in the Income-tax Act relating to deduction in respect of donations to certain funds, charitable institutions, etc.
Sub-section (2) of the said section, inter alia, provides the names of the funds to which any sum paid by the assessee in the previous year as donation is allowed as a deduction to an extent of fifty per cent. of the amount so donated.
It is proposed to omit sub-clauses (ii), (iiic) and (iiid) of clause (a) of the said sub-section.
This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Clause 57 seeks to amend section 115TD of the Income-tax Act relating to Tax on accreted income.
It is proposed to insert a new clause (iii) in sub-section (3) of said section to provide that a trust or institution registered under section 12AA or section 12AB or approved under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 shall be deemed to have been converted into any form not eligible for registration or approval in a previous year, if the specified person fails to make an application in accordance with the provisions of clause (i) or clause (ii) or clause (iii) of the first proviso to clause (23C) of section 10 or sub-clause (i) or sub-clause (ii) or sub-clause (iii) of clause (ac) of sub-section (1) of section 12A, within the period specified in the said clauses or sub-clauses, as the case may be, which expires in the said previous year.
It is further proposed to amend clause (ii) of sub-section (5) of the said section to provide that the principal officer or the trustee of the specified person or the specified person, as the case may be, shall also be liable to pay the tax on accreted income to the credit of the Central Government within fourteen days from the end of the previous year in a case referred to in sub-clause (a) of clause (ii), or clause (iii) of sub-section (3) of the said section.
Clause (i) of Explanation to the section provides the definition of “date of conversion” for the purposes of the said section.
It is also proposed to amend clause (i) of the said Explanation, which defines the expression “date of conversion”, by inserting a new sub-clause (c) to the said clause to provide that date of conversion shall also mean the last date for making an application for registration under sub-clause (i) or sub-clause (ii) or sub-clause (iii) of clause (ac) of subsection (1) of section 12A or for making an application for approval under clause (i) or clause (ii) or clause (iii) of the first proviso to clause (23C) of section 10, as the case may be, in a case referred to in clause (iii) of sub-section (3).
These amendments will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
5. Amendment of section 10.
In section 10 of the Income-tax Act,––
(a) in clause (4D), in the Explanation, in clause (c), in sub-clause (i), in item (I), after the words and figures “Securities and Exchange Board of India Act, 1992, or”, the words, brackets and figures “regulated under the International Financial Services Centres Authority (Fund Management) Regulations, 2022, made under the” shall be inserted;
(b) for clause (4E), the following shall be substituted with effect from the 1st day of April, 2024,––
“(4E) any income accrued or arisen to, or received by a non-resident as a result of––
(i) transfer of non-deliverable forward contracts or offshore derivative instruments or over-the-counter derivatives; or
(ii) distribution of income on offshore derivative instruments, entered into with an offshore banking unit of an International Financial Services Centre referred to in subsection (1A) of section 80LA, which fulfils such conditions as may be prescribed:
Provided that the amount of distributed income referred to in sub-clause (ii) shall include only so much of the amount which is chargeable to tax in the hands of the offshore banking unit under section 115AD.”;
(c) in clause (10D),––
(i) in the second proviso, the words, brackets, figures and letter “or the Explanation to sub-section (2A) of section 88, as the case may be” shall be omitted;
(ii) for the sixth proviso, the following provisos shall be substituted with effect from the 1st day of April, 2024, namely:––
“Provided also that nothing contained in this clause shall apply with respect to any life insurance policy other than a unit linked insurance policy, issued on or after the 1st day of April, 2023, if the amount of premium payable for any of the previous years during the term of such policy exceeds five lakh rupees:
Provided also that if the premium is payable by a person for more than one life insurance policy other than unit linked insurance policy, issued on or after the 1st day of April, 2023, the provisions of this clause shall apply only with respect to those life insurance policies other than unit linked insurance policies, where the aggregate amount of premium does not exceed the amount referred to in the sixth proviso in any of the previous years during the term of any of those policies:
Provided also that the provisions of the fourth, fifth, sixth and seventh provisos shall not apply to any sum received on the death of a person:”;
(d) after clause (12B), the following shall be inserted, namely:––
‘(12C) any payment from the Agniveer Corpus Fund to a person enrolled under the Agnipath Scheme, or to his nominee.
Explanation.—For the purposes of this clause “Agniveer Corpus Fund” and “Agnipath Scheme” shall have the meanings respectively assigned to them in section 80CCH;’;
(e) in clause (22B), after the third proviso, the following proviso shall be inserted with effect from the 1st day of April, 2024, namely:––
“Provided also that nothing contained in this clause shall apply to any income of the news agency of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2024;”;
(f) clause (23BBF) shall be omitted;
(g) in clause (23C),––
(I) with effect from the 1st day of October, 2023,––
(i) in the first proviso, for clause (iv), the following clause shall be substituted, namely:––
“(iv) in any other case, where activities of the fund or trust or institution or university or other educational institution or hospital or other medical institution have––
(A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought;
(B) commenced and no income or part thereof of the said fund or trust or institution or university or other educational institution or hospital or other medical institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (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,”;
(ii) in the second proviso,––
(a) in clause (ii),––
(A) in the opening portion, after the word, brackets and figures “clause (iii)”, the words, brackets, letter and figures “or sub-clause (B) of clause (iv)” shall be inserted;
(B) in sub-clause (b), for item (B), the following item shall be substituted, namely:–
“(B) if he is not so satisfied, pass an order in writing,––
(I) in a case referred to in clause (ii) or clause (iii) of the first proviso, rejecting such application and also cancelling its approval;
(II) in a case referred to in sub-clause (B) of clause (iv) of the first proviso, rejecting such application, after affording it a reasonable opportunity of being heard;”;
(b) for clause (iii), the following clause shall be substituted, namely:––
“(iii) where the application is made under sub-clause (A) of clause (iv) of the said proviso or the application made under clause (iv) of the said proviso, as it stood immediately before its amendment by the Finance Act, 2023, pass an order in writing granting approval to it provisionally for a period of three years from the assessment year from which the approval is sought, and send a copy of such order to the fund or trust or institution or university or other educational institution or hospital or other medical institution:”;
(II) in the third proviso,––
(i) in Explanation 2,––
(a) in clause (i),––
(A) in the proviso, the word “and” shall be omitted;
(B) after the proviso, the following provisos shall be inserted, namely:––
“Provided further that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty-first provisos, and those specified in Explanation 2 and Explanation 3, of this clause, at the time the application was made from the corpus:
Provided also that the amount invested or deposited back shall not be treated as application for charitable or religious purposes under the first proviso unless such investment or deposit is made within a period of five years from the end of the previous year in which such application was made from the corpus:
Provided also that nothing contained in the first proviso shall apply where the application from the corpus is made on or before the 31st day of March, 2021;”;
(b) in clause (ii), after the proviso, the following provisos shall be inserted, namely:––
“Provided further that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty-first provisos, and those specified in Explanation 2 and Explanation 3, of this clause at the time the application was made from loan or borrowing:
Provided also that the amount repaid shall not be treated as application for charitable or religious purposes under the first proviso unless such repayment is made within a period of five years from the end of the previous year in which such application was made from loan or borrowing:
Provided also that nothing contained in the first proviso shall apply where the application from any loan or borrowing is made on or before the 31st day of March, 2021; and”;
(c) after clause (ii), the following clause shall be inserted with effect from the 1st day of April, 2024, namely:–
“(iii) any amount credited or paid out of the income of any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), other than the amount referred to in the twelfth proviso, to any other fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), or trust or institution registered under section 12AB, as the case may be, shall be treated as application for charitable or religious purposes only to the extent of eighty-five per cent. of such amount credited or paid.”;
(ii) in Explanation 3, in clause (c), for the words “furnished on or before”, the words “furnished at least two months prior to” shall be substituted;
(III) in the fifteenth proviso, in Explanation 2,––
(A) in clause (d), for the words “attained finality.”, the words “attained finality; or” shall be substituted;
(B) after clause (d), the following clause shall be inserted, namely:––
“(e) the application referred to in the first proviso of this clause is not complete or it contains false or incorrect information.”;
(IV) in the nineteenth proviso, in the Explanation, with effect from the 1st day of April, 2024,––
(a) after the words, brackets and figures “notified under clause (46)”, the word, brackets, figures and letter “or (46A)” shall be inserted;
(b) for the words, brackets and figures “under clause (46)”, the words, brackets, figures and letter “under clause (46) or clause (46A)” shall be substituted;
(V) in the twentieth proviso, for the words “within the time allowed under that section”, the words, brackets and figures “within the time allowed under sub-section (1) or sub-section (4) of that section” shall be substituted;
(h) clause (23EB) shall be omitted;
(i) clause (26A) shall be omitted;
(j) clause (41) shall be omitted;
(k) in clause (46), for the words “, or a class thereof” at both the places where they occur, the words, figures and letter “other than those covered under clause (46A), or a class thereof” shall be substituted with effect from the 1st day of April, 2024;
(l) after clause (46), the following clause shall be inserted with effect from the 1st day of April, 2024, namely:––
“(46A) any income arising to a body or authority or Board or Trust or Commission, not being a company, which —
(a) has been established or constituted by or under a Central Act or State Act with one or more of the following purposes, namely:––
(i) dealing with and satisfying the need for housing accommodation;
(ii)planning, development or improvement of cities, towns and villages;
(iii) regulating, or regulating and developing, any activity for the benefit of the general public; or
(iv) regulating any matter, for the benefit of the general public, arising out of the object for which it has been created; and
(b) is notified by the Central Government in the Official Gazette for the purposes of this clause;”;
(m) clause (49) shall be omitted.
7. Amendment of section 11.
In section 11 of the Income-tax Act,––
(A) in sub-section (1),––
(a) in Explanation 1, in clause (2), in sub-clause (ii), in the long line, for the words “before the expiry of the time allowed”, the words “at least two months prior to the due date specified” shall be substituted;
(b) in Explanation 4,––
(I) in clause (i),––
(a) in the proviso, for the words “deposit; and”, the word “deposit:” shall be substituted;
(b) after the proviso, the following provisos shall be inserted, namely:––
“Provided further that provisions of the first proviso shall apply only if there was no violation of the conditions specified––
(a) in clause (c) of this sub-section;
(b) in Explanations 2, 3 and 5 of this sub-section;
(c) in the Explanation to this section; and
(c) in clause (c) of sub-section (1) of section 13,
at the time the application was made from the corpus:
Provided also that the amount invested or deposited back shall not be treated as application for charitable or religious purposes under the first proviso unless such investment or deposit is made within a period of five years from the end of the previous year in which such application was made from the corpus:
Provided also that nothing contained in the first proviso shall apply where application from the corpus is made on or before the 31st day of March, 2021;”;
(II) in clause (ii), after the proviso, the following provisos shall be inserted, namely:––
“Provided further that provisions of the first proviso shall apply only if there was no violation of the conditions specified––
(a) in clause (c) of this sub-section;
(b) in Explanations 2, 3 and 5 of this subsection;
(c) in the Explanation to this section; and
(d) in clause (c) of sub-section (1) of section 13,
at the time the application was made from loan or borrowing:
Provided also that the amount repaid shall not be treated as application for charitable or religious purposes under the first proviso unless such repayment is made within a period of five years from the end of the previous year in which such application was made from loan or borrowing:
Provided also that nothing contained in the first proviso shall apply where application from any loan or borrowing is made on or before the 31st day of March, 2021; and”;
(III) after clause (ii), the following clause shall be inserted with effect from the 1st day of April, 2024, namely:––
“(iii) any amount credited or paid, other than the amount referred to in Explanation 2, to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as the case may be, or other trust or institution registered under section 12AB, as the case may be, shall be treated as application for charitable or religious purposes only to the extent of eighty-five per cent. of such amount credited or paid.”;
(B) in sub-section (2), in clause (c), for the words “on or before”, the words “at least two months prior to” shall be substituted;
(C) in sub-section (7), with effect from the 1st day of April, 2024,––
(a) for the words, brackets and figures “and clause (46)”, the words, brackets, figures and letter “, clause (46) and clause (46A)” shall be substituted;
(b) in the first proviso, for the words, brackets and figures “under clause (46)”, the words, brackets, figures and letter “under clause (46) or clause (46A)” shall be substituted;
(c) in the second proviso, for the words, brackets and figures “under clause (46)”, the words, brackets, figures and letter “under clause (46) or clause (46A)” shall be substituted.
8. Amendment of section 12A.
In section 12A of the Income-tax Act,––
(a) in sub-section (1),––
(I) in clause (ac), for sub-clause (vi), the following sub-clause shall be substituted with effect from the 1st day of October, 2023, namely:––
“(vi) in any other case, where activities of the trust or institution have ––
(A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought;
(B) commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, 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,”;
(II) in clause (ba), for the words “within the time allowed under that section”, the words, brackets and figures “within the time allowed under sub-section (1) or sub-section (4) of that section” shall be substituted;
(b) in sub-section (2), the second, third and fourth provisos shall be omitted.
9. Amendment of section 12AB.
In section 12AB of the Income-tax Act,––
(a) in sub-section (1) with effect from the 1st day of October, 2023,––
(A) in clause (b),––
(a) in the opening portion, after the word, brackets and figure “sub-clause (v)”, the words, brackets, letter and figures “or item (B) of sub-clause (vi)” shall be inserted;
(b) in sub-clause (ii), for item (B), the following item shall be substituted, namely:––
“(B) if he is not so satisfied, pass an order in writing,––
(I) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration;
(II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard;”;
(B) for clause (c), the following clause shall be substituted, namely:––
“(c) where the application is made under item (A) of sub-clause (vi) of the said clause or the application is made under sub-clause (vi) of the said clause, as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought,”;
(b) in sub-section (4), in the Explanation, in clause (f), for the words “attained finality.”, the words “attained finality; or” shall be substituted;
(c) after clause (f), the following clause shall be inserted, namely:––
“(g) the application referred to in clause (ac) of subsection (1) of section 12A is not complete or it contains false or incorrect information.”.
40. Amendment of section 80G.
In section 80G of the Income-tax Act,–
(I) in sub-section (2), in clause (a), sub-clauses (ii), (iiic) and (iiid) shall be omitted with effect from the 1st day of April, 2024;
(II) in sub-section (5),–
(A) with effect from the 1st day of October, 2023,–
(i) in the first proviso, for clause (iv), the following clause shall be substituted, namely:–
“(iv) in any other case, where activities of the institution or fund have–
(A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought;
(B) commenced and where no income or part thereof of the said institution or fund has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 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:”;
(ii) in the second proviso,–
(a) in clause (ii),–
(1) in the opening portion, after the word, brackets and figures “clause (iii)”, the words, brackets, figures and letter “or sub-clause (B) of clause (iv)” shall be inserted;
(2) in sub-clause (b), for item (B), the following shall be substituted, namely:–
“(B) if he is not so satisfied, pass an order in writing,–
(I) in a case referred to in clause (ii) or clause (iii) of the first proviso, rejecting such application and cancelling its approval; or
(II) in a case referred to in sub-clause (B) of clause (iv) of the first proviso, rejecting such application,
after affording it a reasonable opportunity of being heard;”;
(b) for clause (iii), the following clause shall be substituted, namely:–
“(iii) where the application is made under sub-clause (A) of clause (iv) of the said proviso or the application is made under clause (iv) of the said proviso as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing granting it approval provisionally for a period of three years from the assessment year from which the approval is sought,”;
(B) in the third proviso, for the words “first proviso”, the words “second proviso” shall be substituted.
57. Amendment of section 115TD.
In section 115TD of the Income-tax Act,–
(i) in sub-section (3),–
(a) in clause (ii), in sub-clause (b), for the word “rejected.”, the words “rejected; or” shall be substituted;
(b) after clause (ii), the following clause shall be inserted, namely:–
“(iii) it fails to make an application in accordance with the provisions of clause (i) or clause (ii) or clause
(iii) of the first proviso to clause (23C) of section 10 or sub-clause (i) or sub-clause (ii) or sub-clause (iii) of clause (ac) of sub-section (1) of section 12A, within the period specified in the said clauses or sub-clauses, as the case may be, which expires in the said previous year.”;
(ii) in sub-section (5), in clause (ii), after the word, brackets and figures “clause (ii)”, the words, brackets and figures “clause (ii), or clause (iii),” shall be inserted;
(iii) in the Explanation, in clause (i),–
(a) in sub-clause (b), after the word, brackets and figure “sub-section (3);”, the word “or” shall be inserted;
(b) after sub-clause (b), the following sub-clause shall be inserted, namely:–
“(c) the last date for making an application for registration under sub-clause (i) or sub-clause (ii) or sub-clause (iii) of clause (ac) of sub-section (1) of section 12A or for making an application for approval under clause (i) or clause (ii) or clause (iii) of the first proviso to clause (23C) of section 10, as the case may be, in a case referred to in clause (iii) of sub-section (3);”.
*****
