An Analysis Of Proposed Amendments In Sections Related To Charitable/Religious Trust
The Highlight of Union Budget 2020 has introduced to make fair changes regarding provisions for granting exemptions to the charitable/ religious trusts, institutions, universities, educational institutions, hospitals, other medical institutions etc. The improvements are also proposed in respect of approval of funds, institutions etc. All these changes are proposed to be made with effect from 1st June, 2020.
We have made an attempt through this article to provide an overview of the proposed changes or improvements.
1. New Provisions for Registration/ Approval
The registration to the charitable/religious trusts, institutions, universities, educational institutions, hospitals, other medical institutions etc. is currently given under Income Tax Act u/s 12AA. Now, it is proposed to make this section inactive from 1st June, 2020 and to give registration under new section 12AB.
2. New Registration/Approval For Limited Period Of 5 Years Only
Nowadays, the registration u/s. 12AA and approval u/s. 10(23C), 80G are given with no expiry period (though may be removed in specific conditions). Now, these are proposed to be given only for the limited period of 5 years under new provisions (without any discretion in the hands of the authorities for any period less than 5 years etc.). On expiry of the previous period the registration/ approval may be re-obtained.
3. Classification of Applicants For Registration/ Approval In Four Categories
The proposed changes or an improvement classifies the cases of applicants for registration/ approval in to four category i.e.
- already registered/approved under the current law
- those whose registration/ approval under new law is expired in 5 years
- those who have been given temporary registration under new law (for 3 years)
- Any other cases i.e., obviously new registration/ approval candidates under new law. All applications under old law which will be pending as on the date of coming in to force of the amendment will be considered as fresh applications filed under the new law.
4. Existing Registered / Approved Entities Also Required To Re Obtain Registration / Approval
The charitable/religious trusts, institutions, universities, educational institutions, hospitals, other medical institutions etc. which are already registered/ approved will also be required to re-obtain registration/approval. The application for re-obtaining will have to be given within the period of 3 months from the date of amendment.
5. Re-Obtaining Of Registration/ Approval After Expiry Of 5 Years
The application for re-obtaining will have to be given at least 6 months before the expiry of the registration/ approval. The PCIT/ CIT will have to make the basic queries and to pass order for accepting or rejecting the registration/ approval.
The author personally feels that the applicability of re-obtained registration/ approval has been linked with the financial year in which the application has been made. This may create some practical issues.
6. New Provisions For Provisional Registration/ Approval
In the existing provisions there was no requirement or regulation for the provisional registration or provisional approval. Either the application is rejected or accepted. The provisional approval may be granted for the period of 3 years (without any discretion in the hands of the authorities for any period less than 3 years etc.).
The first time new applicants will be granted only provisional registration/ approval and will not be directly given final registration. After some time, final registration/ approval may be granted following the prescribed procedure.
7. Procedure For New Applicants
The application for fresh registration/ approval is to be made at least 1 month before the commencement of the previous year relevant to the assessment year from which said registration/ approval is sought.
In case of new first time applicants, the PCIT/ CIT are required to give temporary registration/ approval for 3 years and to send the copy of order to the applicant. No requirement for any detailed enquiry etc. is mentioned like in other cases of registration/ approval. The requirement for detailed enquiry has been mentioned only regarding application for final registration/ approval to provisionally registered/ approved entity.
8. Procedure For Conversion Of Provisional Registration To Full / Final Registration
The provisionally registered institutions etc. will have to apply for final approval at least 6 months prior to the expiry of the provisional registration or within 6 months of commencement of activities which is earlier. In case the final registration/ approval is granted the same will be from the assessment year from which the provisional registration/ approval was granted. The order for registration/ approval in such cases will be required to be passed within 6 months from the end of the month in which the application will be filed.
The “commencement / non commencement of activities” has remained a disputed basis for rejection of application for registration / approval under the existing law. Therefore, it appears that under the new law, the genuine institution may not be rejected registration/ approval (though provisional) for want of commencement of activities.
9. Fresh Registration/ Approval To Be Applied Much Earlier
The application for registration u/s.12AA can be made at any time under the current provisions during the financial year from which the exemption is required.Now, under the proposed provisions, the new applicants will have to make application for registration/ approval at least one month prior to the commencement of the financial year from which exemption is required. The registration/ approval will be granted from such financial year.
10. Due Date Of Filing Of Income Tax Return Extended To 31st October
The due date for filing of the Income Tax Return for such institutions has also been extended to 31st October from 30th September.
11. Other Relevant Amendments
- Similar changes and improvements are proposed in respect of institutions approved u/s.35.
- Donor can claim deduction u/s 80G and 80GGA and it shall be allowed if a statement by donee is provided in respect of donations received and in the event of failure to do so then fee and penalty shall be levied.
- As similar to section 80G of the Act, deduction of cash donation under section 80GGA shall be restricted to Rs. 2,000/- only.
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