The Central Board of Direct Taxes (CBDT) has issued Circular 6/2023, which offers clarifications on the registration and approval processes for charitable and religious trusts and other related compliance issues under the Income-tax Act, 1961. The circular outlines the deadlines, extensions and requirements for registration, renewal and deductions under Section 80G.
Registration and Approval Deadlines
By applying for registration or approval within the specified timeframes, trusts can ensure their compliance with the Income-tax Act and avail themselves of the benefits provided under Section 80G, as summarised here-under:
1. Existing Trusts
Existing trusts were initially required to apply for registration or approval by June 30, 2021. However, due to challenges in electronic filing, the CBDT extended the deadline multiple times until November 25, 2022. If existing trusts missed the previous deadlines, the CBDT has provided an extended due date for filing applications in specific forms.
The registration or approval granted to existing trusts is valid for a period of five years. After the expiration of this period, a fresh application is required to maintain the registered status.
2. New Trusts
Newly established trusts must apply for provisional registration or approval at least one month before the commencement of the previous year relevant to the assessment year. The provisional registration or approval is valid for a maximum of three years.
3. Regular Registration or Approval
Provisionally registered or approved trusts must apply for regular registration or approval using Form 10AB. This application should be submitted at least six months before the expiry of the provisional period or within six months of commencing activities, whichever comes earlier. The regular registration or approval is valid for a period of five years.
4. Renewal of Approval
Trusts that have obtained approval or registration for a period of five years need to apply for renewal at least six months prior to the expiry of the five-year period.
Deductions under Section 80G
Donors to eligible trusts can claim deductions under Section 80G of the Income-tax Act. To avail of these deductions, the donee must provide a statement of donations in Form 10BD and a certificate of donation in Form 10BE. These documents must be furnished by May 31 following the financial year in which the donation is received.
Clarifications and Applicability
The circular provides clarifications on various trust-related provisions, including the applicability of Section 115TD of the Income-tax Act. According to Section 115TD, the accreted income of trusts that fail to apply for registration or approval within the specified time will be liable to tax. The circular acknowledges genuine hardship cases regarding application deadlines and extended due dates will apply to accommodate such cases.
Extended Due Dates for Forms 10A and 10AB
The CBDT has extended the due dates for filing applications in specific forms for trusts that missed the original deadlines. If the original due dates have already expired, the due dates for filing Form No. 10A and Form No. 10AB have been extended to September 30, 2023.
Extended Due Date for Donation Statements in Forms 10BD and 10BE
For the financial year 2022-23, the due date for furnishing the statement of donation in Form 10BD and the certificate of donation in Form 10BE has been extended to June 30, 2023. This extension provides additional time for trusts to comply with the reporting requirements. It is crucial for trusts to utilize this additional time effectively and fulfill their obligations to avoid any potential tax liabilities.
CBDT Income Tax Circular 6/2023
CBDT Circular 6/2023 provides clarifications on the income tax rules and regulations applicable for charitable and religious trusts. The circular explains the changes made by the Taxation and Other Laws Act of 2020 and how they affect the registration and approval processes for trusts. Some key points clarified by the CBDT include the consequences of not applying for registration or approval, an extension of the deadline for submitting Form 10BD, the conditions for provisional registration, the loss of exemption if the statement of accumulation is not filed on time, the requirement to provide an audit report using Form 10B, etc.
CBDT Income Tax Circular 6/2023 dated 24/05/2023: Clarifications on Regstration and Tax Compliance Issues of Charitable Trusts
Conclusion
The provisions and clarifications outlined in Circular No. 6/2023 are aimed at streamlining the registration and approval processes for charitable and religious trusts. It is essential for trusts to understand and comply with these guidelines to ensure proper functioning, compliance with tax regulations and transparency in their operations. By doing so, they can maintain their tax-exempt status and continue to enjoy the benefits of availability of deductions under Section 80G.