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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 a per Finance Act 2021

1. Application of loan / borrowings will not be treated as application of income

  • Application for charitable or religious purposes, from any loan or borrowing, shall not be treated as application of income for charitable or religious purposes.
  • The amount not so treated as application, or part thereof, shall be treated as application for charitable or religious purposes in the previous year in which the loan or borrowing, or part thereof, is repaid from the income of that year and to the extent of such repayment.
Charitable Trusts and Amendments in Finance Act 2021 and FCR

2. Corpus donation received during the year

  • Income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution need to be invested or deposited in one or more of the forms or modes specified in sec 11(5) maintained specifically for such corpus.
  • Application for religious or charitable purposes out of corpus donation shall not be treated as application of income. Explanation 4 to Sec 11(1)
  • The amount not so treated as application shall be treated as application for charitable or religious purposes in the previous year in which the amount, or part thereof, is invested or deposited back in in one or more of the forms or modes specified in sec 11(5).

3. No set off allowed for any excess application in any year

  • The calculation of income required to be applied or accumulated during the previous year shall be made without any set off or deduction or allowance of any excess application of any of the year preceding the previous year.
  • No set off, deduction or allowance of any application of any of the previous year preceding the previous year shall be allowed.

Provisions relating to the registration of charitable trust / Institution w.e.f 01.04.2021 as per Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

  • An application for registration of the trust or institution to the Principal Commissioner or Commissioner.
 

Trust

Due date

where the trust or institution is registered under section 12A or under sec 12AA

within three months from the 1st day of April, 2021

where the trust or institution is registered under section 12AB and the period of the said registration is due to expire

at least six months prior to expiry of the said period

where registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11

at least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative;

where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration

within a period of thirty days from the date of the said adoption or modification

in any other case,

at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought

 

Key amendments of Foreign Contribution (Regulation) Amendment Act, 2020

Following are some of the key amendments that every person, including a Charitable Trust, who receives foreign contributions, should be aware of.

  • The foreign contributions received cannot be transferred to any other person even if they are registered under FCRA. (Section 7)
  • The recipient shall not spend not more than 20% to meet administrative expense out of the contributions during the financial year (sec 8)
  • Aadhaar or a copy of the Passport or Overseas Citizen of India Card, in case of a foreigner of all its office bearers or Directors or other key functionaries required for any person who seeks prior permission or prior approval undersection 11, or makes an application for grant of certificate under section 12, or, as the case may be, for renewal of certificate.
  • A new section 14A enables the Central Government to permit any person to surrender the certificate granted under the Act;
  • Every person who has been granted certificate or prior permission under section 12 shall receive foreign contribution only in FCRA Designated Bank Account with SBI, New Delhi Main Branch (Sec 17)

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Category Income Tax, Other Articles by - CA Haridas Varma 



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