Are you Charitable Trust/Institutions?
Re-register now to continue to avail Tax Exemptions – New Forms notified
In Pre-amendment era, the charitable trusts/Institution were enjoying the perpetual benefit of zero taxation on income earned out of property held by such trust/Institution. Interestingly, once the registration under section 10(23C)/12AA/35/80G/ is notified/granted, will remain in force till the CG/Commissioner of Income tax basis the documents called for, find that the same should be rescinded/withdrawn.
In order to ensure that the conditions of approval or registration or notification are adhered to for want of continuance of exemption, there is need to put a restriction on the validity of approval or registration or notification, for exemption for a limited period. The Government through Finance Act 2020 has brought a non-adversarial regime by providing a periodical renewal process of exemption certificate granted under respective sections. It will save the exemption availing trust/institutions from roving inquiries by the concerned/prescribed authorities in the affairs of the exempt entities on day to day basis and also provide a periodic review process to the concerned authorities to ensure that the entity availing exemption is genuinely involved in the activities, applied for and abide by the laws applicable to it.
In order to understand the amendments in detail, refer our article – https://taxguru.in/income-tax/charitable-trust-institutions-exemption-benefits.html.
Recently, CBDT notified ‘Forms for registration/re-registration’ in order to give effect to the provisions newly inserted by Finance Act 2020. Timelines for filing such forms are tabulated below:
| Case | Particulars | Time limit for filing application | Time limit for disposal of application | Validity for | Registration effective from |
| A | Already registered Charitable trust/ institution | Within 3 months of coming into force (i.e., upto 30 June 2021) | Within 3 months from end of month in which application filed | 5 years (beginning from AY 2022-23) | AY from which approval was earlier granted |
| B | Registered under section 12AB/ 10(23C)/ 80G is due to expire | Atleast 6 months before expiry | Within 6 months from end of month in which application filed (Note-1) | 5 years | AY immediately following the FY in which application is made (Note-2) |
| C | Where provisional registration was granted | Atleast 6 months before expiry or within 6 months of commencement of activities, whichever is earlier | Within 6 months from end of month in which application filed (Note-1) | 5 years | AY from which it was provisionally approved |
| D | Fresh/ New application | One month prior to the commencement of FY from which approval/ registration is sought | Within 1 month from end of month in which application filed | Provisionally for 3 years | AY immediately following the FY in which application is made (Note-2) |
Note-1: First prescribed authority (i.e., Commissioner of Income tax) shall call for documents to ensure the genuineness of transactions and compliance with other applicable laws and accordingly decide, whether approval/registration needs to be extended or not.
Note-2: Applicable from Year in which application is filed.
Note-3: Any pending application (as on 1 April 2021) shall be construed as application filed under Case-D and dealt with accordingly.
Coming to Forms which are out a week ago, there are seven forms in total. For entity seeking registration for the first time or for renewal of registration (in other words re-registration) under section 10(23C)/12AB/80G, Form 10A need to be filed, wherein following details are required to be mentioned/attached:
- Incorporation/Constitution details
- Details of Founder/Trustee/Shareholders/Beneficial owners, etc.
- Details of Assets and Liabilities
- Income details
- Note on Activities of Trust/Institution
- Annual Accounts (for last three years)
Form can be filed online using DSC of the authorized signatory or EVC. Certificate of Registration shall be issued in Form-10AC within the prescribed time limits by the Commissioner of Income-tax (containing 16 digit unique registration number). All the Charitable Trust/Institutions are required to file for renewal on or before 30th June 2021, in order to continue availing the benefits allowed under section-10(23C)/11/12AC/80G, etc. of the Income tax Act, 1961.
Further Form-10BD is notified for filing ‘Statement of Particulars’ (details of Donations) with the Income tax department, which need to be filed on or before 31st May after the end of financial year, i.e., for FY 2021-22, last date is 31st May 2022. Furthermore, as an acknowledgement to donation, along with receipt (that otherwise issued), a ‘Certificate of Donation’ in Form-10BE required to be issued to every donor, containing – Details of donor, Amount of donation, Purpose of donation, which shall be signed by authorized signatory. Each such form is required to be issued to every donor, aggregating all such donations made during the year, on or before 31st May after the end of financial year, i.e., for FY 2021-22, last date is 31st May 2022.
It appears that Government tried to provide a hassle free process for registration and renewal (by making it online), side by side fulfilling their objective of ensuring the genuineness of such trusts. In case of calling of documents, prescribed authority shall provide opportunity of being heard. Hopefully, this new regime will be welcomed and will not put any hardship on exemption availing trust/institution, except a little increase in compliances.
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(The author has tried to discuss broadly about the recently notified forms for registration concerning charitable trust/institutions/research association, etc. and is a practicing Chartered Accountant based in Delhi and can be reached at [email protected])
Disclaimer: The contents of this document are solely for informational purpose as assimilated basis the reading of the Income tax Act and Notification issued. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, certain mistakes and omissions may creep in. The author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied without written permission of the author.
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Nakul ji,
Your article is very informative because at present its knowledge required.