Charitable Trusts and Amendments in Finance Act 2021 and FCR

CA Haridas Varma | Last updated: 22 May 2021

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Quick Summary

The Finance Act 2021, along with amendments to the Taxation and Other Laws Act and the Foreign Contribution (Regulation) Act, has introduced significant changes affecting charitable trusts. These include new rules on how loans and borrowings are treated as income application, specific guidelines for corpus donations, and the prohibition of setting off excess applications from previous years. Additionally, there are updated provisions regarding the registration of charitable trusts and stricter regulations for those receiving foreign contributions, such as limitations on administrative expenses and designated bank accounts.

A brief note on the recent amendments in Finance act 2021, Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and Foreign Contribution (Regulation) Amendment Act, 2020 that will impact the functioning of Charitable Trusts. Amendments applicable to Charitable Trust

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FAQ :

Loans or borrowings used for charitable or religious purposes will not be treated as an application of income. However, amounts repaid from the income of a year will be considered an application in that year.

Corpus donations must be invested in modes specified under Section 11(5). Applications made from these corpus donations are not treated as income application, but any amount not so treated can be considered an application in the year it's reinvested into specified modes.

No, the calculation of income required to be applied or accumulated will be made without any set off or deduction for excess applications from any preceding year.

Foreign contributions cannot be transferred to other persons, and not more than 20% can be used for administrative expenses. Contributions must be received in a designated FCRA bank account.

Yes, new provisions apply from 01.04.2021, with specific due dates for applications based on the trust's current registration status or any changes made to its objects.

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