The 5 Key changes are as follows -
1. 12 A Re-registration - All the charitable trusts, Section 8 companies, NGO's etc need to register again with the Income Tax Authority within 3 months from 1st June 2020.
2. 80G Approval Re-registration - All the trusts and NGO's which already have 80G approval need to get it afresh within 3 months from 1st June 2020.
3. Reporting of all Donations to Income Tax Authorities - Donors will get deduction only based on return filed by trusts, NGO's (same like 26AS TDS credit).
4. Re-registration if objects are changed - If your trust or NGO has changed its objects then also it need to re apply for Income Tax Registration.
5. Commissioner can cancel your Trust Registration - Powers have been given to Commission of Income Tax to cancel trust registration, if the activities are not on accordance with the objects of the trust.
Change No 1 - Compulsory Re-registration of trust under Income Tax
All existing charitable trusts/institutions to apply for re-registration of 12A (w.e.f. 1st June 2020)
It has been proposed in the Budget that all existing trusts or institutions which are registered under Section 12A or under Section 12AA of the Income Tax Act, shall be COMPULSORILY required to make new application and such trust or institution should obtain registration under section 12AB.
Such application is to be made within three months from 1st June 2020. Registration shall be granted by the Principal Commissioner by passing an order within a period of three months from the end of the month in which the application was received and such registration shall be valid for a period of 5 years.
If such application is not made, then, by implication, the registration shall stand cancelled on the expiry of three months i.e. 31st August, 2020. If the registration gets cancelled then, such trust or institution shall not be eligible for claiming exemption in respect of its income under section 11 of the Act.
Further, as per section 115TD of the Act, such trust or institution shall be required to pay tax on the aggregate fair market value of the total assets of the trust or the institution as on 31st August, 2020 which exceeds the total liability of such trust on that date. The tax payable on such value shall be at the maximum marginal rate.
Further, now onwards a trust or institution will be required to apply for re-registration at least six months prior to the expiry of the period of registration of 5 years.
Change No 2 - Compulsory Re-apply for 80G approval
Approval under Section 80G also to be obtained again (w.e.f. 1st June 2020)
It has been proposed in the Budget that all existing trusts or institutions which have obtained approval u/s 80G of the Income Tax Act, shall be COMPULSORILY required to make new application and such trust or institution should obtain approval u/s 80G afresh.
Such application is to be made within three months from 1st June 2020.
Such new approval u/s 80G shall be for a period of 5 years and has to be applied again at least 6 months prior to the expiry of the period of registration.
Change No 3 - Compulsory filing of Return of Donations received
Obligation on Trust or Institution to file Annual Statement of Donation (w.e.f. 1st June 2020)
Every trust or institution approved under section 80G to file statement of donation received and also to issue the certificate to the donor.
Deduction to Donor u/s 80G shall be allowed only on the basis of the statement filed by the donee trust or institution (similar like TDS appearing in 26AS).
In case of delay in filing such statement a late fee of Rs.200 per day shall be applicable along with Penalty of Rs. 10,000 to Rs 100,000/-
Change No 4 - Change in Objects - Reapply for 12A Registration
Application for re-registration to be made within 30 days in the case of modification of the object (w.e.f. 1st June 2020)
Where the trust or institution has adopted or undertaken modification of its objects which do not conform to the conditions on the basis of which registration was granted earlier, then such trust or institution need to apply afresh for registration within a period of 30 days from the date of said adoption or modification.
Change No 5 - Cancellation of Trust Registration
Powers given to the Commissioner to cancel the registration (w.e.f. 1st June 2020)
Where the activities of the trust are not genuine or not being carried out in accordance with the objects of the trust or where the trust is not eligible for exemption under section 11 or section 12 in view of the violation of section 13(1) of the Income Tax Act or the trust or institution has not complied with the requirement of any other law for the time being enforced, then commissioner can cancel the registration of the trust.
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