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Govt. Amendments in Finance Bill & application for renewal/registration of charitable institutions

CA CMA Pratibha Bothra 
on 15 April 2021

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Recent changes & New Law

A new clause (ac) has been inserted in subsection (1) of section 12A w.e.f. 01.04.2021 which states that notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income who wants to claim the benefit of section 11 & 12 is to make an application in the prescribed form (10A or 10AB) and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution.

Govt. Amendments in Finance Bill and application for renewal/registration of charitable institutions

S.no:

Cases where

Prescribed Form & Timeline for applying application for registration

Commissioner or PC to pass order of registration or rejection

1

Trust or Institution having existing registration u/s 12A or 12AA

In Form No. 10A within 3 months from the 01.04.2021

within 3 months from the end of the month in which the application was received

2

Trust or institution is registered under section 12AB and the period of the said registration is due to expire (Section 12AB is under new process or new law effective from 01.04.2021)

In Form No. 10AB at least 6 months prior to expiry

within 6 months from the end of the month in which the application was received

3

Trust or institution has been provisionally registered under section 12AB (Section 12AB is under new process or new law effective from 01.04.2021)

In Form No. 10AB at least 6 months prior to expiry of period of the provisional registration or within 6 months of commencement of its activities, whichever is earlier

within 6 months from the end of the month in which the application was received

4

Registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11.  (Registration u/s 12A or 12AA shall become inoperative from the date on which the trust or institution is approved under clause (23C) of section 10)

in Form No. 10AB at least 6 months prior to the commencement of the assessment year from which the said registration is sought to be made operative

within 6 months from the end of the month in which the application was received

5

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

In Form No. 10AB within a period of 30 days from the date of the said adoption or modification.

within 6 months from the end of the month in which the application was received

6

Any other case (including provisional registration)

In Form No. 10A, at least 1 month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought, and such trust or institution is registered under section 12AB

within 1 month from the end of the month in which the application was received

 

Existing Form 10A has been replaced by new Form 10A

Accordingly, in all cases where trust, societies or institutions have existing registration under section 12AA need to apply for registration under section 12AB online by 30.06.2021 by filing form 10A. Validity of registration will be for 5 years in all cases except in case of Provisional Registration where validity will be for 3 years only.

Form no. 10A or 10AB, as the case may be, required to be digitally signed, if ITR is to be furnished with DSC, otherwise same can be submitted with EVC. Form Nos. 10A or 10AB, as the case may be, shall be verified by the person who is authorised to verify the Income Tax Return.

Process of Registration

Step 1: Applicant (Trust, society or other Institutions) shall apply for registration over Income Tax Portal using their Income Tax Login credentials in Form No. 10A (or 10AB as the case) may be within prescribed timeline. Applicant shall submit other documents as listed below.

Step 2: On receipt of an application in Form No. 10A (or 10AB as the case may be), the Principal Commissioner or Commissioner, authorised by the Board (within allowed timeline as explained above)

  • In case of applicant who is already registered u/s 12AA or in case of Provisional Registration where Form 10A has been submitted – shall pass an order in writing granting registration in Form No.10AC and issue a 16-digit alphanumeric Unique Registration Number (URN) to the applicants (Provisional registration shall be effective from the assessment year beginning on 1st day of April 2022.)
  • In other cases, i.e. where Form 10AB has been submitted – the order of registration or rejection or cancellation of registration shall be in Form No.10AD and in case if the registration is granted, 16 alphanumeric number Unique Registration Number (URN) shall be issued.

May call for any Info: In case, Commissioner or PC thinks necessary, in order to satisfy himself about the genuineness of activities of the trust or institution; and the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects ,he may call for such documents or information from the trust or institution or make inquiries. If he is still not so satisfied, he may pass an order in writing rejecting such application and also cancelling its registration after providing a reasonable opportunity of being heard to applicant.

Cancellation of Registration: If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required or by not complying with the requirements rules, the Principal Commissioner or Commissioner, after giving an opportunity of being heard, may cancel the registration in Form No. 10AC and Unique Registration Number (URN) and such registration or such Unique Registration Number (URN) shall be deemed to have never been granted or issued i.e. cancellation will be effective from day one.

List of Documents need to be submitted along with Form No. 10A and 10AB (as applicable)

The application form 10A or 10AB as the case may be shall be accompanied by the following documents namely:

(a) Where the applicant is created, or established, under an instrument, self-certified copy of such instrument creating or establishing the applicant.

(b) Where the applicant is created, or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant.

(c) Self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be.

(d) Self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010, if the applicant is registered under such Act.

(e) Self-certified copy of existing order granting registration under section 12A or section 12AA or section 12AB, as the case may be.

(f) Self-certified copy of order of rejection of application for grant of registration under section 12A or section 12AA or section 12AB, as the case may be, if any.

(g) Where the applicant has been in existence during any year/s prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the applicant relating to such prior year/s (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;

(h) Where a business undertaking is held by the applicant as per the provisions of section 11 (4)and the applicant has been in existence during any year/s prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business undertaking relating to such prior year/s (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the  audit report as per the provisions of section 44AB for such period;

(i) Where the income of the applicant includes profits and gains of business as per the provisions of section 11(4A) and the applicant has been in existence during any year  prior to the F.Y in which the application for registration is made, self-certified copies of the annual accounts of such business relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the audit report as per the provisions of section 44AB for such period;

(j) Self-certified copy of the documents evidencing adoption or modification of the objects.

(k) Note on the activities of the applicant

Note: Similar amendment has been done in section 80G, where existing registration or new registration can be renewed/applied by filing application 10A or 10AB as the case may be. Moreover, trust or institutions who have been granted 80G registration need to file statement containing details of donations received in Form No. 10BD and a certificate in Form 10BE need to be issued to donors.

 

AMENDMENTS IN FINANCE BILL OUT OF WHICH FEW ARE DISCUSSED HEREUNDER

1. FMV of capital assets transferred under slump sale to be calculated in prescribed manner

The term ‘slump sale’ has been defined under section 2(42C) to mean the transfer of one or more undertakings as a result of sale for lump sum consideration. Some courts have taken a view that transfer by way of exchange, relinquishment etc. shall not be considered as slump sale. To provide clarity on this issue, Section 2(42C) was proposed to be amended by the Finance Bill, 2021 to provide that all types of ‘transfer’ as defined under section 2(47) shall be included within the scope of slump sale.

The Finance Bill (Lok Sabha) has amended Section 50B(2) to provide that the fair market value (FMV) of the capital assets (being an undertaking or division transferred by way of slump sale) as on the date of transfer shall be calculated in the prescribed manner. Such FMV shall be deemed to be full value of the consideration received or accruing as a result of transfer of such capital asset.

2. Tax on Interest earned on PF contribution

The Finance Bill, 2021 proposed amendment to Section 10(11) and Section 10(12) that no exemption shall be available for the interest income accrued during the previous year in the recognized and statutory provident fund to the extent it relates to the contribution made by the employees over Rs. . 2,50,000 in the previous year. This amendment is applicable from the assessment year 2022-23.

The Finance Bill (Lok Sabha) has added a second proviso to Section 10(11) and Section 10(12) that if an employee is contributing to the fund but there is no contribution to such fund by the employer, then the interest income accrued during the previous year shall be taxable to the extent it relates to the contribution made by the employee to that fund in excess of Rs. 5,00,000 in a financial year. The interest income shall be taxable under the head ‘Income from other sources.

3. Tax Audit

A new proviso has been inserted in the Finance Bill (Lok Sabha) that for computation of the higher threshold limit of Rs. 10 Cr, the payment or receipt settled through a non-account payee cheque or a non-account payee bank draft shall be deemed to be cash payment or cash receipt respectively. Thus, the same shall be included while computing the 5% cash transaction limit.

4. Fee for default in linking Aadhaar and PAN

It is mandatory for every person, who is eligible to obtain Aadhaar, to quote the Aadhaar Number in the Income-tax return and in the application for allotment of PAN. Further, every person who has been allotted PAN as on July 1, 2017, and who is eligible to obtain Aadhaar number, shall link his PAN with Aadhaar.

In case, assessee fails to do so, the PAN allotted to the person shall be made inoperative after the notified due date (30-06-2021).

The Finance Bill (Lok Sabha) has inserted a new Section 234H to levy a fee for default in intimating the Aadhaar Number. Therefore, if a person fails to link PAN-Aadhaar by 30-06-2021, he shall be liable to pay a fee, maximum of Rs. 1,000.

Further, where a person is required to furnish, intimate or quote his PAN, and his PAN has become inoperative, it shall be deemed that he has not furnished, intimated or quoted the PAN. Consequently, he shall be liable for all the consequences for not furnishing, intimating or quoting the PAN.

NRIs are eligible to apply for Aadhaar & consequently, the linking of PAN with Aadhaar provision shall apply to them as well.

5. Late Fee for Default in furnishing Return of Income

The late filing fee under Section 234F is charged when a person fails to furnish a return of income by the due date prescribed under section 139(1). The fees to be charged depends on the quantum of income and the date of filing of return of income.

The Finance Bill, 2021 had proposed to reduce the time-limit to file belated or revised returns of income, as the case may be, by 3 months. Therefore, the last date to file the revised or belated return shall be 31st December of the relevant Assessment Year.

The Finance Bill (Lok Sabha) has made a consequential amendment to Section 234F that the late-filing fee shall be Rs. 5,000. However, where the total income of a person does not exceed Rs. . 5 Lakhs, the fee payable shall not exceed Rs. 1,000. After the amendment, the late-filing fee shall be leviable in the following manner:

Amount of Total Income

Date of filing of ITR

Fees

Not liable to file Return of Income

Anytime

NIL

Any amount of income

On or before due date

NIL

Up to Rs. 5,00,000

After Due date

Rs. 1000

Above Rs. 5,00,000

After Due Date

Rs. 5000


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