Registration & Approval Process for Charitable & Religious Trusts – CBDT Clarifies

Explore the detailed analysis of CBDT’s Circular No. 6/2023, providing clarifications on the registration and approval process for charitable and religious trusts under the Income-tax Act, 1961. Learn about key provisions, application deadlines, and implications for existing and new trusts, ensuring compliance with income tax regulations.

Analysis of Income Tax Circular No. 6/2023 dated 24th May 2023: Clarifications on Registration and Approval Process for Charitable and Religious Trusts under the Income-tax Act, 1961

The Income-tax Act, 1961 provides exemptions for the income of various funds, institutions, trusts, universities, hospitals, and other educational or medical institutions. These exemptions are subject to certain conditions outlined in relevant sections of the Act. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 introduced amendments related to the registration and approval process for trusts. This article analyzes the circular that provides guidance and clarifications on these provisions.

Registration and Approval Process:

(a) Existing Trusts: Existing trusts were required to apply for registration or approval by June 30, 2021. However, considering difficulties in electronic filing, the Central Board of Direct Taxes (CBDT) extended the due date multiple times, ultimately until November 25, 2022. The registration or approval granted is valid for five years, after which a fresh application is required.

(b) New Trusts: New trusts need to apply for provisional registration or approval at least one month before the relevant assessment year begins. Provisional registration or approval is valid for a maximum of three years.

(c) Provisionally Registered/Approved Trusts: Such trusts must apply for regular registration or approval using Form No. 10AB at least six months before the expiry of the provisional period or within six months of commencing activities, whichever is earlier. This registration or approval is valid for five years.

(d) Renewal of Registration/Approval: Trusts approved or registered for five years must apply at least six months prior to the expiry of the five-year period.

(e) Deduction under Section 80G: Donors can claim deductions under Section 80G if the donee provides a statement of donations in Form lOBD and a certificate of donation in Form lOBE by May 31 following the financial year in which the donation is received.

The circular provides further clarification on the following aspects:

1. Clarifications on Trust Provisions: The circular addresses several representations seeking clarity on trust-related provisions. Key clarifications include:

2. Applicability of Section 115TD: The Finance Act, 2023 introduced an amendment to Section 115TD, making the accreted income of trusts not applying for registration or approval liable to tax. This amendment applies from April 1, 2023, and subsequent assessment years.

3. Genuine Hardship Cases: The circular acknowledges that some trusts faced genuine hardship in meeting the application deadlines. The extended due dates for filing applications mentioned earlier will apply, and trusts failing to apply within the specified time will be subject to tax under Section 115TD.

4. Extension of Due Dates: The CBDT, under its powers, extends the due date for making applications in specific forms. The circular extends the due dates for Form No. lOA and Form No. 10AB applications to September 30, 2023, if the original due dates have already expired.

5. Extension for Form No. lOBD: The due date for furnishing the statement of donation in Form No. 10BD and the certificate of donation in Form No. lOBE for the financial year 2022-23 is extended to June 30, 2023.

6. Provisional Registration: The circular provides clarity on the effective dates of provisional registration or approval, aligning them with the assessment year in which the application is made. The validity of provisional registration is three assessment years, subject to specific provisions.

Denial of Exemption for Late Filing: Amendments require trusts to furnish Form No. 10 and Form No. 9A at least two months before the due date for filing the income tax return. However, representations highlighted challenges

Conclusion:  Several due dates for filing applications and forms related to registration and approval have been extended. Charitable or religious trusts and institutions now have until 30th September 2023 to furnish their applications for re-registration or approval, which was previously due on 25th November 2022. Similarly, provisionally registered or approved trusts or institutions have an extended due date of 30th September 2023 to submit their applications for regular registration or approval under section 10(23C) and 12AB of the Income-tax Act, 1961.

Furthermore, the due date for filing Form 10A, which applies to existing organizations that were unable to renew their registration, has been extended to 30th September 2023. Similarly, organizations that were provisionally registered but couldn’t file Form 10AB on time for final registration now have until 30th September 2023 to do so, even if their previous application was rejected due to late filing.

Additionally, existing organizations that obtained provisional registration because they forgot to apply for renewal can now surrender their provisional registration and reapply for the renewal of their earlier registration under section 12A, 80G, or 10(23C). It is important to note that the provisional registration will be effective from the assessment year relevant to the previous year in which the application is made.

The due date for filing Form 10BD, which pertains to the Statement of Donations, has been extended from 31st May 2023 to 30th June 2023. Lastly, the circular highlights that Budget ’23 has preponed the due date for filing Form 9A and 10 for the accumulation of income by two months, starting from the fiscal year 2022-2023. The circular clarifies that even if these forms are not filed on time but are submitted before the due date of furnishing the return, the deemed application shall not be denied.

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