CBDT Extends Deadline For Registration By Charitable, Religious Trusts Till Sept. 30

The Finance Act brought in an amendment that income earned by the trusts, if not registered within a time, won't be tax-exempt.

<div class="paragraphs"><p>Income tax (Photo: iStock)</p></div>
Income tax (Photo: iStock)

The central government extended the deadline for charitable, religious trusts and institutions to file the re-registration or approval application that allows tax exemption till Sept. 30.

In a circular issued on Wednesday, the Central Board of Direct Taxes also extended the deadline for provisionally registered or approved trusts to apply for registration under Sections 10(23C) and 12AB of the Income Tax Act.

The previous due date for submitting the application for re-registration or approval was Nov. 25, 2022. The last date for applying for a regular registration or approval by provisionally registered or approved trusts/institutions was Sept. 30, 2022.

The Finance Act, 2023, brought in an amendment in Section 115TD of the Income Tax Act by which income earned by such trusts—if such trusts are not registered within a specified time—will not be tax-exempt. The tax is levied at the maximum marginal tax rate of 34.94%.

This amendment came into effect from April 1 and will apply to assessment year 2023–24 and subsequent assessment years.

The clarification offers more time for these trusts to apply for registration. It follows representations received by the government that many of the trusts had not been able to apply for registration or approval within the required time due to genuine hardship. This had also led to rejection of applications on the ground that they were delayed.

Key Highlights:

  • There will be no tax liability due to delay in furnishing applications, as the deadline has been extended to Sept. 30.

  • Pending applications under Form 10AB, previously filed after Sept. 30, 2022, will now be considered valid.

  • Previously rejected applications, on account of not meeting the deadline in filing applications, will now be able to apply for a fresh application within the extended timeline.

Other clarifications issued by the CBDT include:

  • Timeline extension in submitting donation statement: The government has extended the deadline for furnishing a statement of donation and the certificate of donation in Form 10BD that pertain to donations received during the recently concluded financial year till June 30, 2023.

  • Applicability of provisional approval: Provisional approval or registration shall be effective from the assessment year relevant to the previous year in which the application is made and shall be valid for a period of three assessment years.

  • Clarity on timeline while providing statement of accumulation: Statement of accumulation in Forms 10 and 9A is required to be furnished at least two months prior to the due date of furnishing return of income, so that it may be taken into account while auditing the books of account. The accumulation/deemed application would be valid as long as the statement of accumulation/deemed application is submitted by the trust on or before the due date of return filing.

"Representations have been received that the trusts may not be able to furnish Form No. 10 and Form No. 9A before the finalisation of their computation of income," the circular said.

"Since the computation of income is finalised at the time of furnishing of return of income, therefore, the trusts should be allowed to furnish Form No. 10 and Form No. 9A by the due date of furnishing their income tax return."

Payment Modes Specified In Audits

One of the conditions required to be fulfilled by the trusts, to be eligible to claim tax exemption, is that the total income of any trust does not exceed the chargeable limit for income tax in any previous year. This implies trusts must get their accounts audited.

Under Forms 10B and 10BB, auditors bifurcate certain payments or applications in electronic modes and non-electronic modes.

According to the clarification, account payee cheque drawn on a bank, an account payee bank draft or use of electronic clearing system through a bank account would be considered along with already outlined electronic modes—such as credit and debit card, net banking, and the Unified Payments Interface.