Introduction:
The deadline for submitting applications by charity or religious trusts and institutes for re-registration or authorization has been extended by the Central Board of Direct Taxes (CBDT) on Wednesday, May 24. The new deadline is September 30, 2023. The previous cutoff date was November 25, 2022.
Charitable organizations, religious trusts, healthcare providers, and educational institutions are all free from paying taxes on their income under the Income Tax Act. Still, the I-T department must grant these organizations registration before they may operate.
What do you mean by A Charitable Trust?
A charitable trust is a binding trust set up for charitable objectives; it is a more precise phrase than "charitable organization" in some jurisdictions. In most nations, charitable foundations profit from taxes to varied degrees. Individuals who own unnecessary assets like stocks or real estate might gain financially in a variety of ways from charitable foundations.
A charitable trust is generally used to build up your assets in a way that will benefit you, the appropriate beneficiaries, and the charity all at once. These trusts can offer a number of advantages to those who want to support the business with non-essential assets like stocks or real estate.
CBDT’s extension of the deadline for charity trust re-registration to September 30:
Following arguments from the CBDT that numerous trusts had been unable to submit registration applications within the stipulated period because of actual challenges, the CBDT decided to approve the request for an extension. Additionally, the CBDT extended the deadline for submitting the gift statement and certificate for donations made during the fiscal year 2022–2023 to June 30, 2023. When trusts, funds, or institutions apply for temporary authorization or temporary registration, the request will take impact in the assessment year that corresponds to the prior year in which the application was made and remains in influence for three assessment years.
Additionally, so long as a declaration of accumulation or presumed application is provided before the deadline for supplying the return, the accumulation of assets or presumed application will not be rejected by a trust.
The Central Board of Direct Taxes increased the due date for trusts that are provisionally registered or permitted to submit an application for registration under Sections 10(23C) and 12AB of the Income Tax Act in a circular released on Wednesday. Prior to Nov. 25, 2022, the request for approval or re-registration had to be submitted. By temporarily registered or approved trusts/institutions, the deadline to apply for a regular register or certification was September 30, 2022. The Finance Act of 2023 changed Section 115TD of the Income Tax Act such that income produced by such trusts would no longer be taxation-exempt if the trusts were not registered within a certain amount of time. The tax is imposed at the 34.94% maximal effective tax rate.
Key points of the update;
Since the deadline has been expanded to September 30, there will be no tax liability as a result of the delay in submitting applications.
Applications under Form 10AB that have been pending since being submitted after September 30, 2022, will now be regarded as legitimate.
Applicants whose applications were previously denied due to missing the application deadline may now reapply during the extended period of time.
Clarifications issued by CBDT:
Additional explanations provided by the CBDT involve an Increase in the deadline for filing the donation statement: As of the just-finished fiscal year, the government has postponed the due date for submitting the gift statement and certificate in Form 10BD until June 30, 2023.
Provisional approval's scope of application: A preliminary authorization or registration has validity for three assessment years and begins with the assessment year that is associated with the year in which the request was lodged.
Clarification on the timing of delivering the statement of accumulation: In order for the claim of accumulation in Forms 10 and 9A to be considered during the audit of the books of account, it must be provided at least two months before the due date for providing the return of revenue. as soon as the trust submits a declaration of accumulation/deemed application on or before the deadline for filing returns, the accumulation/deemed application will be accepted. The circular stated: "Representations have been obtained that the trusts might not be able to submit Form No. 10 and Form No. 9A prior to the completion of their income computation. The trusts should be permitted to submit Form No. 10 and Form No. 9A by the deadline for submitting their income tax return because the calculation of income has been completed at that time.
Modes of Payment Mentioned in Audits:
The total income of any trust cannot exceed the taxable limit for income tax in any prior year, which is one of the requirements the trusts must meet in order to be qualified to claim tax exemption. Accordingly, trusts are required to have their accounts audited. Auditors divide specific payments or applications into electronic and non-electronic modes under Forms 10B and 10BB. The update states that in addition to the already mentioned electronic modes—such as credit and debit cards, net banking, and the Unified Payments Interface—account payee cheques drawn on banks, account payee bank draughts, or use of a digital clearing system via a bank account would be taken into consideration.
Conclusion
Additionally, the CBDT extended the deadline for submitting the gift statement and certificate for donations made during the fiscal year 2022–2023 to June 30, 2023. New trusts must, however, submit their applications for temporary registration at least a month before the start of the year of assessment for which the registration is requested. According to CBDT, this interim license lasts for a maximum of three years.
All currently operating trusts were needed to submit new applications for registration or approval, which are valid for five years after they are approved. According to the CBDT circular, trusts that have already received a five-year approval must reapply at least six months before the five-year approval period expires.
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