Clarification regarding provisions relating to charitable and religious trusts
Comprehensive Analysis of Circular No. 6 of 2023: Clearing the Air on Provisions for Charitable and Religious Trusts
Introduction:
On the 24th of May, 2023, the Central Board of Direct Taxes (CBDT), a department under the Ministry of Finance, Government of India, issued Circular No. 6 of 2023. This circular aims to provide detailed clarification on the provisions related to charitable and religious trusts. In this article, we will explore the key topics covered in the circular, including the application of section 115TD for failure to apply for registration/approval, the applicability of provisional registration, the denial of exemption in case of non-filing of the statement of accumulation by the due date, and the audit report requirements in Form No. 10B.
Clarification regarding the application of section 115TD for failure to apply for registration/approval:
Circular No. 6 sheds light on the significance of registration and approval for charitable and religious trusts. It emphasizes that trusts seeking tax benefits must adhere to the registration and approval processes as stipulated in the Income Tax Act. The circular clarifies that the provisions of section 115TD, which pertain to the taxability of unregistered trusts, will not be applicable to trusts that are mandated to obtain registration or approval under sections 12AA or 12AB of the Act. Therefore, the failure to comply with the registration requirements will not automatically invoke section 115TD.
Clarification regarding the applicability of provisional registration:
The circular provides guidance on provisional registration for charitable and religious trusts. It states that provisional registration can be granted to a trust while inquiries or verifications are being conducted. However, the circular clarifies that provisional registration does not guarantee the subsequent grant of regular registration. If a trust fails to meet the conditions required for regular registration within the prescribed timeframe, the provisional registration will cease to have effect from the specified date in the order of provisional registration.
Clarification regarding the denial of exemption for non-filing of the statement of accumulation by the due date:
Circular No. 6 emphasizes the importance of timely filing of the statement of accumulation by charitable and religious trusts. It clarifies that if a trust fails to file the statement of accumulation within the due date specified under section 115TD, the tax benefits and exemptions under the Income Tax Act may be denied to the trust. Therefore, trusts are strongly advised to fulfill their reporting obligations promptly to avoid any adverse consequences.
Clarification regarding the audit report to be furnished in Form No. 10B:
The circular highlights the requirement for charitable and religious trusts to submit an audit report in Form No. 10B. This report provides detailed information about the trust’s compliance with the provisions of the Income Tax Act. Circular No. 6 further clarifies that the audit report in Form No. 10B must be filed electronically using the digital signature of the auditor. Non-compliance with this requirement may result in penalties or other legal repercussions.
Conclusion:
Circular No. 6 of 2023 issued by the CBDT serves as a significant source of clarity on various provisions concerning charitable and religious trusts. The circular addresses important topics, including the application of section 115TD for failure to apply for registration/approval, the applicability of provisional registration, the denial of exemption for non-filing of the statement of accumulation by the due date, and the audit report requirements in Form No. 10B.
Charitable and religious trusts must ensure strict compliance with these provisions to avail themselves of the tax benefits and exemptions provided under the Income Tax Act.
Non-compliance with this requirement may result in penalties or other legal repercussions.
