Introduction of new Section 12AB by Finance Act, 2020- Charitable trusts-Amendment in Section 12AA/ 80G/ 80GGA

Charitable Trust

♦ Introduction

On, February 01,2020 Finance Minister of India, Ms. Nirmala Sitaraman presented the Union Budget 2020 wherein she proposed substantial amendments for granting exemptions to the charitable / religious trusts institutions etc. Under the new tax regime, she proposed to amend Section 10(23C), Section 11, Section12A, Section12AA, Section 80G and proposed to insert a new Section 12AB. All these amendments are proposed to be made w.e.f. June 01, 2020.

The following amendments classified the charitable / religious trusts institutions etc. into four Categories which are: –

A. Charitable / religious trusts/ institutions etc. registered under existing laws. (‘A Category’)

B. Charitable / religious trusts/ institutions etc. whose registration expired under the new provisions in 5 years. (‘B Category’)

C. Charitable / religious trusts institutions etc. having provisional registration under new provisions. (‘C Category’)

D. Others Cases. (‘D Category’)

Further, the amended provisions have been discussed in brief below: –

♦ Procedure and time limit to obtain registration under new provisions

Basis A Category B Category C Category D Category
Application to be made for registration Within three months from the Commencement of the new provisions i.e. June 01, 2020. Atleast Six months prior to the expiry of the registration. Within Six Months from the commencement of activities or six months prior to the expiry of provisional registration, whichever is earlier. Atleast one month prior to the commencement of the previous year relevant to the assessment year for which approval is sought.
Order to be passed Commissioner or Principle Commissioner shall pass an order in writing granting approval for five years Commissioner or Principle Commissioner shall pass an order in writing granting approval for five years after verifying the genuineness of the activities and objects by calling for any document as, he may deem fit. Commissioner or Principle Commissioner shall pass an order in writing granting approval for five years after verifying the genuineness of the activities and objects by calling for any document as, he may deem fit. Commissioner or Principle Commissioner shall grant in writing the provisional registration for three years and send a copy of such order to the Charitable/ religious trusts institutions etc.
Income on which new provisions and registration shall apply Assessment year from which approval was earlier granted to it Immediately following the financial year in which such application is made From the first of the assessment years for which provisional  Registration granted. Immediately following the financial year in which such application is made
Time period in which order shall be passed Within three months, respectively, calculated from the end of the month in which the application was received Within six months, respectively, calculated from the end of the month in which the application was received Within six months, respectively, calculated from the end of the month in which the application was received Within one months, respectively, calculated from the end of the  month in which the application was received
Application to be made for 80G Within three months from the Commencement of the new provisions i.e. 1st June, 2020. Atleast Six months prior to the expiry of the registration. Within Six Months from the commencement of activities or six months prior to the expiry of provisional registration, whichever is earlier. Atleast one month prior to the commencement of the previous year relevant to the assessment year for which approval is sought.

Key points to be noticed under new provisions —

> In case, if a charitable/religious trusts/ institution etc. get itself registered under Section 10(23C) or 10(46) then the registration under Section 12AB shall stand inoperative, whereas if the charitable/religious trusts institution etc. apply again for registration under Section 12AB then the registration under Section 10(23C) or 10(46) shall stand inoperative.

> Application for registration under Section 12AB shall be made to the Commissioner or Principle Commissioner of the Income tax.

> Further, the process for getting registered under Section 12AA and Section 10(23C) is same as discussed in the above table.

> Registration under Section 12AA shall stand inoperative w.e.f. June 01, 2020.

> For B and C category of trusts the Commissioner or Principle Commissioner of Income tax shall reject the application in case, they are not satisfied with the genuineness and compliances of the objects, after providing the reasonable opportunity of being heard.

> In case of modification or alteration in the objects of the charitable/religious trusts institution etc., the charitable/religious trusts institution etc. shall file the application for registration with the modified and altered objects under the new provisions of law within 30 days from the day of modification of objects.

All applications pending under Section 12AA before the Commissioner or Principle Commissioner and for application for which no order has been passed, shall deemed to be applications pending under Section 12AB.

Further, in case where Commissioner or Principle Commissioner is satisfied that the charitable/religious trusts institution etc. have not complied with the objects mentioned or any other law, shall cancel the registration of charitable/religious trusts institution etc. after providing the reasonable opportunity of being heard.

♦ Amendments under Section 80G

The Charitable/religious trusts institution etc. shall file an application before the Commissioner or Principle Commissioner within the prescribed time limits to sought registration under Section 80G. Procedure and time limit to file an application for registration under Section 80G is same as the procedure for registration under Section 12AB.

Further, the Charitable/religious trusts institution etc. shall file a statement of receipts of donation to the prescribed Income tax authority in the prescribed time.

Further, the charitable/religious trusts institution etc. shall furnish to the donor, a certificate specifying the

amount of donation in such manner, containing such particulars and within such time from the date of receipt of donation, as may be prescribed. Furthermore, the donor shall be provided the deduction under 80G directly in the return of income on the basis of the prescribed statements

♦ Amendments under Section 80GGA

Clause 34 of Finance bill, 2020 has specified that no deduction shall be allowed to the donor under Section 80GGA in respect, of donation exceeding amount of Rs. 2,000/- unless donation is paid in any mode than than cash.

♦ Furnishing of Statements and Certificate

Charitable/religious trusts institution etc. shall furnish the following statements: –

  • Statement as prescribed under Section 35(1) to the prescribed Income tax authority or furnishing certificate as prescribed under clause (ii) of Section 35(1A)
  • Statement for receipt of donation under Section 80G to the prescribed Income tax authority or furnishing certificate as prescribed under clause (ix) of sub section 5 of Section 80G.

In case of failure to file the above statements the Charitable/religious trusts institution etc. shall be levied the fees of Rs. 200/- for each day during which the failure continues.

Further, the Assessing office may levy penalty of amount not less than Rs. 10,000/- which may be extended to an amount of Rs. 1,00,000/-.

♦ Amendment under Section 115TD

After the introduction of Section 12AB, nothing contained in Section 12AA shall be applicable to the trust or institution registered under Section 12AA. Hence in order to make the provisions of Section 115TD applicable Clause 33 of the Finance Bill, 2020 have substituted the word, figures and letters “under section 12AA” with the words, figures and letters “under section 12AA or section 12AB” in Section 115TD which shall be effective from June 01,2020.

♦ Conclusion

Amendments brought in by Finance Bill, 2020 will bring additional burden of compliances for Charitable/religious trusts institution etc. but it will definitely lead to greater and transparent monitoring of activities of charitable trusts. The aforesaid amendments seem to be in the way to make the processes more transparent and uncorrupted by use of digital means.

Author Bio

Qualification: Student - CA/CS/CMA
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Location: Faridabad, Haryana, IN
Member Since: 04 Feb 2020 | Total Posts: 1

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12 Comments

  1. Arulsakthi says:

    ANY PROVISION AVAILABLE IN INCOME TAX ACT FOR REGISTRATION OF TRUST FOR WELFARE OF EMPLOYEES? ARE THERE ANY SPECIFIC POINTS TO BE TAKEN INTO CONSIDERATION AS FAR AS INCOME TAX ACT OR OTHER ACTS ARE CONCERNED?

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