Clarifications on various provisions relating to Charitable & Religious Trusts

The Central Board of Direct Taxes (CBDT) has issued Circular No. 6/2023 dated 24/05/2023 to provide clarifications on various provisions related to charitable and religious trusts following the amendments made by the Finance Act 2023.

These clarifications encompass different aspects, including the application of section 115TD when a trust fails to apply for registration, an extension of the deadline for submitting Form No. 10BD and Form No. 10BE, the applicability of provisional registration, an extension of the deadline for submitting the statement of accumulation, and clarification regarding the submission of the audit report in Form 10B.

• Extension of the deadline for registration/approval application under section 115TD : Finance Act, 2023 amended section 115TD to tax the accrued income of trusts that have not applied for registration/approval within the specified time limit. This amendment is effective from 01.04.2023, applying to the assessment year 2023-24 and subsequent years.

Circular No. 22 of 2022, dated 01.11.2022, extended the deadline for existing trusts seeking registration/approval to 25.11.2022. Additionally, provisionally registered/approved trusts were given an extension until 30.09.2022 to furnish their registration/approval applications. Failure to submit the application by the respective deadlines will subject these trusts to tax under section 115TD (as amended by the Finance Act, 2023).

Under section 119, the Board has exercised its powers to extend the deadline for filing an application in Form No. 10A or Form No. 10AB until 30.09.2023 for cases where the due date for making such application has expired prior to such date.

Trusts that have already submitted Form No. 10AB applications after 30.09.2022, without an order from the Principal Commissioner or Commissioner, may consider it a valid application. Trusts that had their Form No. 10AB application rejected solely due to late submission, and where the rejection occurred before the issuance of this Circular, may submit a fresh application in Form No. 10AB within the extended time until 30.09.2023.

For trusts that missed the 25.11.2022 deadline for applying for provisional registration/approval in Form No. 10A but subsequently submitted the form, they can use the relevant functionality on the e-filing portal to surrender the Form No. 10A and make a new application within the extended period until 30.09.2023

• Extension of the deadline for Form No. 10BD and Form No. 10BE submission : CBDT has extended the deadline for submitting the statement of donation in Form No. 10BD and the certificate of donation in Form No. 10BE for donations received during the financial year 2022-23 to 30.06.2023.

• Applicability of provisional registration : It has been clarified that that in case of trusts, funds or institutions seeking provisional approval or provisional registration for section 10(23C), section 12A, or section 80G will be effective from the assessment year relevant to the previous year in which the application is made. This provisional status will be valid for three assessment years, subject to the provisions of the aforementioned sections.

• Benefit of accumulation not to be denied if Statement of Accumulation is furnished before furnishing the return of income : Finance Act, 2023 amended section 11 and section 10(23C) to provide that the  statement of accumulation should be furnished at least two months prior to the due date for filing the income tax return under section 139(1). However, the circular clarifies that the trust will not be denied the benefits of accumulation or deemed accumulation as long as the statement of accumulation/deemed application is furnished on or before the due date for filing the return as per section 139(1),

• Clarification on Electronic Modes and Account Payee Cheques in Auditor's Reports : The audit reports in Form No. 10B and Form No. 10BB require the auditor to bifurcate certain payments or application in electron ic modes and non-electronic modes. The accompanying notes to the said Form specify various electronic modes, such as Credit Card, Debit Card, Net Banking, IMPS, UPI, RTGS, NEFT, and BHIM (Bharat Interface for Money) Aadhar Pay. However, these notes do not include account payee cheques drawn on a bank, account payee bank drafts, or the utilization of electronic clearing systems through a bank account.

  To clarify, it has been stated that for the purposes of Form No. 10B and Form No. 10BB, the mentioned electronic modes are additional to the usage of account payee cheques drawn on a bank, account payee bank drafts, or electronic clearing systems through a bank account.

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