The Budget for 2024 has introduced several significant amendments to the Income Tax Act, 1961, impacting various aspects of direct and indirect taxes. Among these changes, the provisions related to trusts have seen notable updates. Here’s a summary of the key amendments:
Previously, trusts or institutions seeking registration under Section 12AB to claim income tax exemptions had to file their application in Form No. 10A (Provisional Registration) or Form No. 10AB (Final Registration) within a specified timeframe. Failure to do so could result in the trust being liable for tax on accreted income and losing its exemption status.
To address this, the CBDT issued Circular No. 07/2024 on April 25, 2024, extending the deadline for filing these forms to June 30, 2024. Additionally, a new proviso will be inserted into Section 12A(1)(ac), allowing the Principal Commissioner or Commissioner to condone delays if there is a reasonable cause. This change will be effective from October 1, 2024.
Section 80G provides approval for funds or institutions to receive donations, which in turn allows donors to claim deductions. The CBDT has also extended the deadline for filing approval applications under Section 80G to June 30, 2024.
Previously, if a fund or institution did not apply within the specified timeline, it faced permanent exit from Section 80G approval. The new amendment proposes that trusts or institutions that have commenced activities but did not claim exemptions under other sections can apply for Section 80G approval at any time after starting their activities. It also introduces a revised procedure for rejection of applications, including the requirement for a written order and a reasonable opportunity for the trust or institution to be heard. These changes will also take effect from October 1, 2024.
The current requirement for processing applications for registration under Section 12AB or approval under Section 80G stipulates a six-month period from the end of the month in which the application is received. The new amendment aims to standardize this timeline to six months from the end of the quarter in which the application is received. This change is intended to improve administrative efficiency and will be effective from October 1, 2024.
Currently, there are two main regimes under which trusts can claim exemptions: the provisions of Section 10(23C) and the provisions of Sections 11, 12, and 13. The Budget proposes to sunset the first regime and transition trusts, funds, or institutions to the second regime gradually. This simplification will also take effect from October 1, 2024.
These amendments aim to streamline the process for trusts and institutions, ensuring more efficient management and compliance. If you are involved with a trust or institution, it is crucial to review these changes and adjust your processes accordingly to stay compliant with the new regulations.
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