CBDT has amended IT Rule 17/ Form 10 to allow income accumulation by entities approved u/s 10(23C) for a period of up to 5 years when utilisation is less than 85% in a given preceding year, on par with trusts/ institutions approved u/s 11, vide Notification 96/2022 dt. 17/08/2022.
To qualify for the tax exemption, a trust or institution must apply at least 85% of its income from the previous year, according to IT Section 11. However, such a trust/ institution is permitted to accumulate any unutilized/ underutilized revenue for the next five years if it was not used in the same previous year for whatever reason, subject to the fulfilment of certain conditions provided in IT Rule 17, such as timely filing of Form 9A/ 10.
As a result, in order to align provisions relating to income accumulation with those of Section 11, and in accordance with Explanation 3 inserted in the third proviso to Section 10(23C) by the Finance Act, 2022, the CBDT has amended IT Rule 17/ Form 10 to include/ incorporate norms for filing of Form 10 by entities approved under Section 10(23C).
CBDT Income Tax Notification 96/2022 dt. 17/08/2022: IT Rule 17/ Form 10 amended to allow accumulation of income by S. 10(23C) entities
G.S.R. 632(E).- In exercise of the powers conferred under clause (a) of Explanation 3 to the third proviso to clause (23C) of section 10 and clause (a) of sub-section (2) of section 11 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income tax Rules, 1962, namely:-
1. Short title and commencement.-
(1) These rules may be called the Income-tax (25th Amendment) Rules, 2022.
(2) They shall come into force from 01/04/2023.
2. In the Income-tax Rules, 1962 (hereinafter referred to as principal rules), for rule 17, the following rule shall be substituted, namely:-
17. Exercise of option etc. under Explanation 3 to the third proviso to clause (23C) of section 10 or section 11.–
(1) The option to be exercised in accordance with the provisions of the Explanation to sub-section (1) of section 11 of the Act in respect of income of any previous year relevant to the assessment year beginning on or after 01/04/2016 shall be in Form No. 9A and shall be furnished before the expiry of the time allowed under sub-section (1) of section 139 of the Act for furnishing the return of income of the relevant assessment year.
(2) The statement to be furnished to the Assessing Officer or the prescribed authority under clause (a) of the Explanation 3 to the third proviso to clause (23C) of section 10 of the Act or under clause (a) of sub-section (2) of section 11 of the Act or under the said provision as applicable under clause (21) of section 10 of the Act shall be in Form No. 10 and shall be furnished before the expiry of the time allowed under sub-section (1) of section 139 of the Act, for furnishing the return of income.
(3) The option in Form No. 9A referred to in sub-rule (1) and the statement in Form No. 10 referred to in sub-rule (2) shall be furnished electronically either under digital signature or electronic verification code.
(4) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall-
(i) specify the procedure for filing of Forms referred to in sub-rule (3);
(ii) specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule (3), for purpose of verification of the person furnishing the said Forms; and
(iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to Forms so furnished.
3. In the principle rules, in the APPENDIX, for Form No. 10, the following Form shall be substituted, namely:-
FORM No. 10
[See rule 17(2)]
Statement to be furnished to the Assessing Officer/ Prescribed Authority under clause (a) of the Explanation 3 to the third proviso to clause (23C) of section 10 or under clause (a) of sub-section (2) of section 11 of the Income-tax Act, 1961
[please refer attachment for the detailed format]
Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969(E) dt. 26/03/1962 and last amended vide notification number G.S.R. 622(E) dt. 10/08/2022.