Tds exemption for trust u/sec 12aa of it act

TDS 40496 views 18 replies

Ravishankar K

Accountant

461 Points Joined March 2011

Dear Friends,

We have entered into contract agreement with an Organisation for Business Purposes. That Organisation comes under Trust. Now while making payment to the Organisation my accounts department is of the view that TDS should be deducted @ 2% U/s 194C , whereas the Organisation which comes under a Trust and uses the Pan Card of the trust is of the view that they are exempt from Income Tax being charitable trust and have submitted Order Under Sec 12AA of the Income Tax Act 1961 given by Income Tax (Exemptions Directorate) and the IT Dept has registered them under Sec 12AA of IT Act. This Order is dated year 2010 and scanned copy is attached for your reference. In this regard, please confirm whether while making the Payment to Organisation TDS needs to be deducted or not.

Attached File : 533334 1306633 ec.pdf downloaded: 3559 times

Replies (18)

DINU SUKUMAR

Audit Manager

176 Points Joined September 2013

Hii Sir,

12AA registered trusts are not tax exempted. They have some exemptions u/s 13 of the IT Act ie. mainly for receiving donations, claiming of capital expenditures, application of income and accumulation. There is no special exemption from other normal provisions of the Act, they have exemptions specified u/s 13 only and since you are liable to deduct TDS for such contract payment normally, at 2%. Regards

Ravishankar K

Accountant

461 Points Joined March 2011

Hi,

Thank you very much for the reply the Organisation is quoting Sec 13 rule as below:

(ii) The income is for the benefit of any particular religious community
or caste. However, income for benefit of persons belonging to
Scheduled castes, Scheduled tribes, women and children will not
be denied exemption u/s 11 & 12.

Since the Contract given to them is benefitting only SC/ST they are claiming that it is exempt from Income Tax as per Sec 13.

Please clarify whether are we competent to waive off the TDS deduction.

Income Tax Wala: (Fin. Expert)

Chartered Accountants

2015 Points Joined August 2010

You are liable to dedcut TDS @ 2% irrespective of the fact that payment is being made to a trust which is registered u/s 12 AA

Z

Tax Consultation (US and India)

2970 Points Joined September 2011

Tax is to be deducted,as affirmed by other users but deduction wont be required if trust gives you copy of certificate(no deduction of tax u/s 197) issued by their jurisdictional ao. I think they will need to apply in form no13 to ao & certificate will be issued u/s 197

Z

Tax Consultation (US and India)

2970 Points Joined September 2011

Unless they have this certificate they will face this problem in all cases where tax is required to be deducted @ source. So advice them to apply to ao & this certificate will need to be renewed from time to time, its valid for 1 assessment year,validity will be mentioned on certificate

Ravishankar K

Accountant

461 Points Joined March 2011

Thank you very much for your replies, as they are an engineering college mostly conduct business in money rotation (black - white) and donation types hence they are not worried about the income tax at all.

In this case only we are worried as we are subject to strict audits and non deduction of tds would result in observation by auditors, if proper reason & justification is not there for non deduction of TDS.

I will take these points and ensure that we act as per law.