Form No. 10 of the Income Tax Act – An overview

“Discover the key amendments in Form No. 10 of the Income Tax Act through Notification No. 96/2022. Learn about the conditions, consequences, and the impact on trusts/institutions registered under various clauses of Section 10(23C). Stay informed about the filing requirements and the period for accumulation or setting apart income for subsequent years.”

INTRODUCTION

This Article is related to one of the amendment made in Form No. 10 by Notification No. 96/2022 dated 17^th August, 2022 which became applicable for all the Trust/Institution registered under sub clause (iv)(v)(vi)(via) of Section 10(23C) of the Act for F.Y. 2022-23 (A.Y. 2023-24).

OVERVIEW OF FORM NO. 10
Existing Provision before Amendment

Applicable for -Earlier, Form No. 10 was required to be filed by all the Trust & Institution availing option under clause (a) of sub-section (2) of section 11 i.e. registered u/s 12AA/12AB of the Act.

Purpose of Filing of Form 10–

For claiming exemption under Sec 11 of the Act, it is provided that the Trust & Institution registered u/s 12AA/ 12AB of the Act have to mandatorily apply 85% of its income earned during the relevant previous year wholly and exclusively to the charitable objects for which it was granted registration.

However, in case where the Trust & Institution failed to apply 85% of its income during the relevant previous year and decided to accumulated its income, either in whole or in part for application to such objects in subsequent assessment year, subject to conditions stipulated therein , then such income so accumulated or set apart shall not be included in the Total Income of such Trust/Institution.

Amendment Made By Finance Act, 2022

The amendment inserted by Finance Act, 2022 related to Form No. 10 which became applicable from 1^st April, 2023 i.e. while filing ITR of F.Y. 2022-23 (A.Y. 2023-24) read as follows:

Applicable for– It became applicable for all fund/institution/trust/university/educational institution/hospital/medical institution referred to in sub clause (iv)(v)(vi)(via) of Sec 10(23C) (clause (a) of the Explanation 3 to the third proviso of Sec 10(23C)), Or

Trust/Institution registered u/s 12AA/12AB of the Act (clause (a) of sub­section (2) of section 11)

Fails to apply 85% of its income earned during the relevant previous year for such objects for which it was granted registration but accumulates or set apart either wholly or in part for application to such objects in subsequent assessment years.

Need for Amendment–

Actually the fund/institution/trust/university/educational institution/hospital/medical institution referred to in sub clause (iv)(v)(vi)(via) of Section 10(23C) of the Act also has the liberty of accumulating income for application to such objects for which it was granted registration in the subsequent assessment year where such trust / Institution failed to apply 85% of the Income earned during the relevant previous year.

But, there was no such provision to file Form No. 10 and passing Board resolution by such Trust/Institution covered under Sec 10(23C) and this has provided an undue benefit to such Trust/Institution referred to in sub clause (iv)(v)(vi)(via) of Section 10(23C) of the Act. Hence to remove this disparity and to bring such Trust/Institution u/s 10(23C) in line with the

Trust/Institution registered u/s 12AA/12AB of the Act, this amendment was introduced by inserting an explanation 3 under sub clause (a) to section 10(23C) of the Act.

Explanation 3 under clause (a) of Section 10(23C) of the Act, which states as follows

Where the fund/institution/trust/university/educational institution/hospital/medical institution referred to in sub clause (iv)(v)(vi)(via) of Section 10(23C) of the Act fails to apply 85% of its income earned during the relevant previous year for such objects for which it was granted registration but accumulates or set apart either wholly or in part for application to such objects in subsequent assessment years, then such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income i.e. exemption shall be provided subject to the conditions:

• Furnish a statement in Form No. 10 to the assessing officer stating the purpose for which it is accumulated or set apart and the period of accumulation shall not exceed 5 years. (*subject to proviso below)
• The amount so accumulated or set apart shall be invested/deposited in the forms or modes specified in sub section (5) of Section 11 of the Act.
• Form No. 10 shall be filed on or before the due date of filing ITR as specified under sub section (1) of Sec 139.

( Form 10 should be filed at least two month prior to the date of filing ITR as specified u/s 139 of the Act)

* Provided that in computing the period of 5 years referred to conditions mentioned above shall not include the period where income could not be applied for which is was accumulated o set apart, due to an order or injenction of the Court

CONSEQUENCES ON VIOLATION OF THE CONDITIONS STIPULATED  ABOVE

Any amount accumulated or set apart wholly or in part for application to such objects in subsequent assessment years, if applied for

• for purposes other than wholly and exclusively to the objects for which 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) is established or ceases to be accumulated or set apart for application thereto; or
• ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5) of section 11; or
• is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of Explanation 3; or i.e. during a period of 5 years;
• is credited or paid to any trust or institution registered under section 12AA or section 12AB or to 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 Sec 10(23C),

Then, it shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid.