Clarification on Provisions Relating to Charitable and Religious Trusts

Introduction:
Charitable and religious trusts serve as important institutions in society, dedicated to various noble causes. The Income-tax Act, 1961 provides exemptions and benefits to support these organizations. However, several provisions and amendments have been introduced to regulate the registration process, filing requirements, and taxation aspects. In this comprehensive guide, we will provide detailed information on these provisions to ensure better understanding and compliance by trusts.

1. Registration and Approval Process:
(a) Existing Trusts: All existing trusts were initially required to apply for registration or approval by 30th June 2021. However, considering the challenges faced in electronic filing, the Central Board of Direct Taxes extended the due date to 31st August 2021, and subsequently to 31st March 2022, and further till 25th November 2022. The registration/approval granted to existing trusts is valid for a period of 5 years.
(b) New Trusts: New trusts are required to apply for provisional registration/approval at least one month prior to the commencement of the previous year relevant to the assessment year for which registration/approval is sought. Provisional registration/approval is valid for a maximum period of three years.
(c) Provisionally Registered/Approved Trusts: Trusts with provisional registration/approval need to apply for regular registration/approval using Form No. 10AB. This application must be submitted at least six months prior to the expiry of the provisional registration/approval period or within six months of the commencement of activities, whichever is earlier. The regular registration/approval is valid for a period of five years.
(d) Renewal of Registration/Approval: Trusts that have been approved/registered for five years need to reapply at least six months prior to the expiry of the initial five-year period.

2. Deduction under Section 80G:
To claim a deduction under section 80G of the Income-tax Act, the donee (trust) must furnish a statement of donations in Form 10BO. The certificate of donation should be provided in Form No. 10BE. Both forms need to be submitted by the 31st of May following the financial year in which the donation is received.

3. Clarification on Section 115TD:
The Finance Act, 2023 introduced an amendment to section 115TD of the Income-tax Act. This amendment makes the accreted income of trusts that fail to apply for registration/approval within the specified time liable to tax. The amendment is applicable from 1st April 2023, affecting the assessment year 2023-24 and subsequent years.

4. Extension for Application Filing:
To address genuine hardships faced by trusts unable to apply for registration/approval within the required time, the Central Board of Direct Taxes has provided an extension for filing applications. The extended due date is as follows:
(i) Form No. 10A: For applications under clause (i) of the first proviso to clause (23C) of section 10 or sub-clause (i) of clause (ac) of sub-section (1) of section 12A or clause (i) of the first proviso to sub-section (5) of section 80G, the deadline is extended until 30th September 2023.
(ii) Form No. 10AB: For applications under clause (iii) of the first proviso to clause (23C) of section 10 or sub-clause (iii) of clause (ac) of sub-section (1) of section 12A, the deadline is also extended until 30th September 2023.

5. Exemption Denial for Late Filing: The Finance Act, 2023 introduced changes regarding the due dates for filing the statement of accumulation (Form No. 10) and the option for deemed application of income (Form No. 9A). To claim exemptions and benefits, trusts must ensure the following:
(i) Form No. 10: The statement of accumulation must be furnished at least two months prior to the due date of filing the income tax return.
(ii) Form No. 9A: The option for deemed application of income must also be furnished at least two months prior to the due date of filing the income tax return.

Conclusion:
The provisions and clarifications relating to charitable and religious trusts aim to streamline the registration, approval, and taxation processes. Trusts should ensure timely compliance with the extended due dates for application filing and the submission of necessary forms and statements to avoid tax implications. By maintaining proper adherence to these provisions, trusts can continue their noble work while benefiting from the exemptions and benefits provided by the Income-tax Act, 1961.

Download/Refer Circular No: 06 of 2023 Dated: 24-May-2023