The proposed Finance Bill 2024 introduces amendments regarding the registration of trusts or institutions under section 12A of the Income-tax Act. Currently, timely application for registration under section 12AB is crucial; failure results in potential taxation under Chapter XII-EB or loss of exemption status. The amendment enables the Principal Commissioner or Commissioner to condone delays in filing such applications, treating them as timely if reasonable cause is shown. This provision aims to alleviate situations where trusts or institutions miss deadlines due to unforeseen circumstances, ensuring they can continue under the exemption regime without incurring tax liabilities on accreted income. Effective from October 1, 2024, the amendments also extend applicability conditions to trusts or institutions approved under specific clauses of section 10, streamlining the registration process for a broader range of entities.
Budget 2024: Condonation of delay in filing application for registration by trusts or institutions
A trust or institution desirous of seeking registration under section 12AB is inter alia required to apply within timelines specified in clause (ac) of sub-section (1) of section 12A.
2. It has been noted that at times trusts or institutions are unable to file application within specified timelines. In case a trust or institution is unable to apply within time specified, it may become liable to tax on accreted income as per provisions of Chapter XII-EB of the Act. A situation of permanent exit of trust or institution from the exemption regime may also arise.
3. It is proposed that the Principal Commissioner/ Commissioner may be enabled to condone the delay in filing application and treat such application as filed within time. The delay may be condoned if he considers that there is a reasonable cause for the same.
4. These amendments will take effect from the 1st day of October, 2024.
Proposed Amendment to section 12A of Income Tax Act, 1961 vide Finance Bill, 2024
In section 12A of the Income-tax Act, in sub-section (1), in clause (ac) with effect from the 1st day of October, 2024,––
(a) in sub-clause (ii),––
(i) after the words, figures and letters “under section 12AB”, the words, brackets, figures and letters “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 inserted;
(ii) after the words “the period of the said registration”, the words “or approval as the case may be,” shall be inserted;
(b) in sub-clause (iii),––
(i) after the words, figures and letters “under section 12AB”, the words, brackets, figures and letters “or provisionally 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 inserted;
(ii) after the words “period of the provisional registration”, the words “or provisional approval as the case may be,” shall be inserted;
(c) after sub-clause (vi), the following proviso shall be inserted, namely:―
“Provided 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.”.
Extract of Clause 6 of Finance Bill 2024
Clause 6 of the Bill seeks to amend section 12A of the Income-tax Act relating to conditions for applicability of sections 11 and 12.
Sub-section (1) of the said section provides the conditions for applicability of sections 11 and 12 in respect of income of any trust or institution.
Clause (ac) of the said sub-section provides that the provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless, inter alia, such trust or institution has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution within the time period specified under the said clause and such trust or institution is registered under section 12AB.
Sub-clause (ii) of clause (ac) of sub-section (1) of the said section provides that where the trust or institution is registered under section 12AB and the period of the said registration is due to expire, such trust or institution shall make an application for registration at least six months prior to expiry of the said period.
Sub-clause (iii) of clause (ac) of sub-section (1) of the said section provides that where the trust or institution has been provisionally registered under section 12AB, such trust or institution shall make an application for registration at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier.
It is proposed to amend said sub-clauses (ii) and (iii) of clause (ac) of the said sub-section to allow trust or institution approved or provisionally approved as the case may be, under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 to apply under the said sub-clauses with similar conditions.
It is further proposed to insert proviso to clause (ac) of sub-section (1) of the said section 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.
These amendments will take effect from 1st October, 2024.
