The Finance Bill 2024 introduces provisions concerning the merger of trusts or institutions registered under specific tax exemption regimes. When entities approved under these regimes merge, they may trigger tax implications under Chapter XII-EB, relating to accreted income. To offer clarity and certainty to taxpayers, it is proposed that mergers meeting certain conditions will be exempt from Chapter XII-EB provisions. This exemption will be governed by a newly proposed Section 12AC of the Income-tax Act, empowering the Board to establish rules specifying merger conditions. These amendments are scheduled to come into effect from April 1, 2025, aiming to streamline the merger process for charitable trusts and institutions under India’s tax laws.
Budget 2024: Merger of trusts under the exemption regime with other trusts
When a trust or institution which is approved / registered under the first or second regime, as the case may be merges with another approved / registered entity under either regime, it may attract the provisions of Chapter XII-EB, relating to tax on accreted income in certain circumstances.
2. It is proposed that conditions under which the said merger shall not attract provisions of Chapter XII-EB, may be prescribed, to provide greater clarity and certainty to taxpayers. A new section 12AC is proposed to be inserted for this purpose.
3. These amendments will take effect from the 1st day of April, 2025.
[Clause 8]
Extract of Clause 8 of Finance Bill 2024
Clause 8 of the Bill seeks to insert in section 12AC in the Income-tax Act, relating to merger of charitable trusts or institutions in certain cases. Proposed new section empowers the Board to make rules to specify the conditions for the purpose of merger.
Proposed Amendment to section 12AC of Income Tax Act, 1961 vide Finance Bill, 2024
After section 12AB of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April 2025, namely:––
Merger of charitable trusts or institutions in certain cases.
“12AC. Where any trust or institution registered under 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, as the case may be, merges with another trust or institution, the provisions of Chapter XII-EB shall not apply if––
(a) the other trust or institution has same or similar objects;
(b) the other trust or institution is 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, as the case may be; and
(c) the said merger fulfils such conditions as may be prescribed.”.
