An Insight into Amendments for Charitable Trusts

Budget 2020 has amended certain provisions of the Income Tax Act, 1961 having a great impact on the functioning of the registered Charitable Trusts and NGOs. These charitable trusts and NGOs have been burdened with the renewal of existing registration, setting an expiry date for registration, filing of statements of donation receipts, and other formalities. However, relaxation has been provided for new registration of trusts formed for charitable purposes.

A charitable organization is a non-profit organization whose primary objectives are philanthropy and social well-being (e.g. educational, religious, or other activities serving the public interest or common good).

World-wide charitable organizations are known as NGOs - an acronym that stands for Non-Governmental Organization. As the name suggests, they are independent of any government. They are usually non-profit and many are active in humanitarian or social areas. Mostly, they carry out the work which a government should do. They run on voluntary contributions from the public.

Because of their social and charitable work, the Income Tax Act has allowed many exemptions to charitable organizations subject to compliance of certain conditions. Once a charitable organization takes registration under the Income Tax Act, it is commonly called as Charitable Trust.

While presenting the Union Budget for 2020-21 on 1st February 2020 the Finance Minister Nirmala Sitaraman acknowledged the role of charitable institutions in the society. Her budget speech for charitable organizations and new initiatives taken by the government is reproduced below-

Acknowledging the important role played by the charitable institutions in the society, the income of these institutions is fully exempt from taxation. Further, donation made to these institutions is also allowed as deduction in computing the taxable income of the donor.

Currently, a taxpayer is required to fill the complete details of the donee in the income tax return for availing deduction.

In order to ease the process of claiming deduction for donation, it is proposed to pre-fill the donee’s information in taxpayer’s return on the basis of information of donations furnished by the donee. This would result in hassle-free claim of deduction for the donation made by the taxpayer.

Further, in order to claim the tax exemption, the charity institutions have to be registered with the Income Tax Department. In the past, the process of the registration was completely manual and scattered all over the country.

In order to simplify the compliance for the new and existing charity institutions, I propose to make the process of registration completely electronic under which a unique registration number (URN) shall be issued to all new and existing charity institutions. Further, to facilitate the registration of the new charity institution which is yet to start their charitable activities, I propose to allow them provisional registration for three years.

The announcements made by the Finance Minister in the Budget Speech is definitely a welcome move. But the complexities are seen when one reads the amendments that are proposed in the Finance Bill, 2020.

There are numerous amendments related to Charitable Trusts and other institutions in the Finance Bill, 2020 many of which are a repeat of similar nature for all the relevant provisions. The summarized nature of amendments is listed under before the amendments are discussed in detail.

Also Read:

Section 12AB: Amendments in Procedure for Registration of Charitable Trusts and NGOs

Instant provisional registration for three years to a new Charitable Trust:

It is proposed to amend relevant provisions of the Act to provide that an entity making fresh application for approval under clause (23C) of section 10, for registration under section 12AA, for approval under section 80G shall be provisionally approved or registered for three years on the basis of application without detailed inquiry even in the cases where activities of the entity are yet to begin and then it has to apply again for approval or registration which, if granted, shall be valid from the date of such provisional registration.

The application of registration subsequent to provisional registration should be at least six months prior to the expiry of provisional registration or within six months of the start of activities, whichever is earlier.

In other words, the application for final registration shall be made within 2-1/2 years from the date of provisional registration or within 6 months from the date of the start of activities, whichever is earlier.

The application pending for approval or registration, as the case may be, shall be treated as an application in accordance with the new provisions, wherever they are being provided for.

In other words, if any application for approval or registration is pending before this amendment comes into effect, then such an application shall be treated as an application filed as per the new provision and provisional registration or approval will be given for three years.

Renewal of existing registration of Charitable Trusts:

An entity approved, registered or notified under clause (23C) of section 10, section 12AA or section 35 of the Act, as the case may be, shall be required to apply for approval or registration or intimate regarding it being approved, as the case may be, and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five previous years at one time calculated from 1st April, 2020.

An entity already approved under section 80G shall also be required to apply for approval and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five years at one time.

Update:

CBDT extended compliances date for new section 12AB and other Charitable Trusts procedures amid COVID-19

Update:
New Registration Procedure under section 12AB Deferred and Extended to April 2021 from October 2020/December 2020

Also Read:

How to file Statement of Donation in Form No. 10BD

How to issue Certificate of Donation in Form 10BE

How to File Form 10A for Approval under Section 80G

Understanding Form 10A, Form 10AB, Form 10AC and Form 10AD for Section 12AB, Section 80G, Section 35, Section 10(23C)

Validity of Registration Certificate:

It is proposed that approval or registration or notification for exemption should be for a limited period not exceeding 5 years at one time. This new process needs to be provided for both existing and new exempt entities.

Periodic filing of Statement of Donation receipts:

Deduction under section 80G or 80GGA to a donor shall be allowed only if a statement of donations received is furnished by the donee who shall be required to furnish a statement in respect of donations received and in the event of failure to do so, fee and penalty shall be levied.

Dual registration u/s 10(23C) or 12AA not allowed:

Similar to the exclusion provided to a trust or institution eligible to claim benefit of exemption under section 10(23C) (relating to inter alia exemption of income of hospitals, etc.), entities eligible for exemption under section 10(46) (constituted under central or state enactments) are also proposed to avail the benefit. It is also proposed that exemption either under section 10(23C)/10(46) or under section 11 or section 12 will be granted. In other words, the benefit of both exemptions will not be granted simultaneously.

Cash Donation restricted to Rs. 2,000:

The limit of cash donation to scientific research or rural development for claiming deduction under section 80GGA is proposed to be reduced from Rs.10,000 to Rs.2,000.

Rationalisation of provisions relating to trust, institution and funds.

Amendment of sub-section (7) of section 11 to allow entities holding registration under section 12A/12AA to apply for notification under clause (46) of section 10

Section 11 of the Act provides for grant of exemption in respect of income derived from property held under trust for charitable or religious purposes to the extent to which such income is applied or accumulated during the previous year for such purposes in accordance with the provisions contained in sections 11, 12, 12A, 12AA and 13 of the Act.

Sub-section (7) of section 11 of the Act, inserted by the Finance (No. 2) Act, 2014 with effect from 1st April, 2015, provides that where a trust or an institution has obtained registration under section 12AA [as it stood immediately before its proposed amendment] or under section 12A [as it stood immediately before its amendment by the Finance (No 2) Act, 1996] and said registration is in force for any previous year, then, exemption under section 10 [except under clauses (1) and (23C)] shall not be allowed.

This sub-section was inserted on the basis that the provisions contained in sections 11, 12, 12A, 12AA and 13 of the Act constitute a complete code and that once any trust or institution has voluntarily opted for it by obtaining registration required for exemption of income, it should comply with the conditions of such exemption and in case of violation of such condition, if its income or part thereof becomes ineligible for exemption, no other provision of the Act should operate so as to exclude such income or part thereof from total income and that whether income which needs to be applied or accumulated under section 11 of the Act should include income which is exempt under section 10 of the Act.

It has been noticed that there is some anomaly by providing exclusion to institutions or fund registered under clause (23C) of section 10, but the same exclusion is not available to entities claiming exemption under clause (46) of section 10 which are established or constituted under a Central or State Act or by a Central or State Government. Such entities are, thus, not able to get notified under clause (46) of section 10 if they are holding registration under section 12A/12AA.

The anomaly pointed out above, needs to be addressed. However, as the provisions relating to charitable entities constitute a complete code and that once any trust or institution has voluntarily opted for it by obtaining the requisite registration, it flows that the conditions in relation thereto should be complied with and the option of switching at convenience should not be available. Accordingly, while request for exclusion of clause (46) may be acceded to for exemption thereunder even in those cases where registration under section 12AA or 12A remains in force, there should be only one mode of exemption available and also, that the switching may be allowed only once so that such switching is not done routinely and also it remains efficient to be administered.

Rationalising the process of registration of trusts, institutions, funds, university, hospital etc and approval in the case of association, university, college, institution or company, etc.

The present process of registration of trusts, institutions, funds, university, hospital etc under section 12AA or under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10, and approval of association, university, college, institution or company etc need improvement with the advent of technology and keeping in mind the practical issue of difficulty in obtaining registration/ approval/ notification before actually starting the activities.

It is also felt that the approval or registration or notification for exemption should also be for a limited period, say for a period not exceeding five years at one time, which would act as check to ensure that the conditions of approval or registration or notification are adhered to for want of continuance of exemption. This would in fact also be a reason for having a non-adversarial regime and not conducting roving inquiry in the affairs of the exempt entities on day to day basis, in general, as in any case they would be revisiting the concerned authorities for new registration before expiry of the period of exemption. This new process needs to be provided for both existing and new exempt entities.

Filing of statement of donation by donee to cross-check claim of donation by donor

It may further be mentioned that certain provisions of the Act provide that an exempt entity may accept donations or certain sum for utilisation towards their objects or activities in respect of which the payer, being the donor, gets deduction in computation of his income. At present, there is no reporting obligation by the exempt entity receiving donation/ any sum in respect of such donation/ sum. With the advancement in technology, it is now feasible to standardise the process through which one-to-one matching between what is received by the exempt entity and what is claimed as deduction by the assessee. This standardisation may be similar to the provisions relating to the tax collection/ deduction at source, which already exist in the Act. Therefore, the entities receiving donation/ sum may be made to furnish a statement in respect thereof, and to issue a certificate to the donor/ payer and the claim for deduction to the donor/ payer may be allowed on that basis only. In order to ensure proper filing of the statement, levy of a fee and penalty may also be provided in cases where there is failure to furnish the statement.

Hence, it is proposed to amend relevant provisions of the Act to provide that,-

(i) similar to exemptions under clauses (1) and (23C), exemption under clause (46) of section 10 shall be allowed to an entity even if it is registered under section 12AA subject to the condition that the registration shall become inoperative. If the entity wishes to make it operative in the future, it will have to file an application and then it would not be entitled for deduction under clause (46) from the date on which the registration becomes operative.

(ii) the registration under section 12AA would also become inoperative in case of an entity exempt under clause (23C) of section 10 as well, to have uniformity. The condition about making it operative again would also be similar to what is proposed for clause (46) of section 10.

(iii) an entity approved, registered or notified under clause (23C) of section 10, section 12AA or section 35 of the Act, as the case may be, shall be required to apply for approval or registration or intimate regarding it being approved, as the case may be, and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five previous years at one time calculated from 1st April, 2020.

(iv) an entity already approved under section 80G shall also be required to apply for approval and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five years at one time.

(v) application for approval under section 80G shall be made to Principal Commissioner or Commissioner.

(vi) an entity making fresh application for approval under clause (23C) of section 10, for registration under section 12AA, for approval under section 80G shall be provisionally approved or registered for three years on the basis of application without detailed enquiry even in the cases where activities of the entity are yet to begin and then it has to apply again for approval or registration which, if granted, shall be valid from the date of such provisional registration. The application of registration subsequent to provisional registration should be at least six months prior to expiry of provisional registration or within six months of start of activities, whichever is earlier.

(vii) the application pending for approval, registration, as the case may be, shall be treated as application in accordance with the new provisions, wherever they are being provided for.

(viii) deduction under section 80G or section 80GGA to a donor shall be allowed only if a statement is furnished by the donee who shall be required to furnish a statement in respect of donations received and in the event of failure to do so, fee and penalty shall be levied.

(ix) similar to section 80G of the Act, deduction of cash donation under section 80GGA shall be restricted to Rs 2,000/- only.

These amendments will take effect from 1st June, 2020.

The bare amendments by the Finance Bill, 2020 with Clause Number reference are reproduced below:

Amendment of section 10.

7. In section 10 of the Income-tax Act,–

(I) in clause (23C),–

(A) with effect from the 1st day of June, 2020,–

(a) for the first and second provisos, the following provisos shall be substituted, namely:–

“Provided that the exemption to the fund or trust or institution or university or other educational institution or hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) under the respective sub-clauses shall not be available to it unless such fund or trust or institution or university or other educational institution or hospital or other medical institution makes an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,–

(i) where such fund or trust or institution or university or other educational institution or hospital or other medical institution is approved under the second proviso [as it stood immediately before its amendment by the Finance Act, 2020], within three months from the date on which this clause has come into force;

(ii) where such fund or trust or institution or university or other educational institution or hospital or other medical institution is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period;

(iii) where such fund or trust or institution or university or other educational institution or hospital or other medical institution has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier;

(iv) in any other case, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought,

and the said fund or trust or institution or university or other educational institution or hospital or other medical institution is approved under the second proviso:

Provided further that the Principal Commissioner or Commissioner, on receipt of an application made under the first proviso, shall,-

(i) where the application is made under clause (i) of the said proviso, pass an order in writing granting approval to it for a period of five years;

(ii) where the application is made under clause (ii) or clause (iii) of the said proviso,–

(a) call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about—

(A) the genuineness of activities of such fund or trust or institution or university or other educational institution or hospital or other medical institution; and

(B) the compliance of such requirements of any other law for the time being in force by it as are material for the purpose of achieving its objects; and

(b) after satisfying himself about the objects and the genuineness of its activities under item (A), and compliance of the requirements under item (B), of sub-clause (a),–

(A) pass an order in writing granting approval to it for a period of five years;

(B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its approval after affording it a reasonable opportunity of being heard;

(iii) where the application is made under clause (iv) of the said proviso, pass an order in writing granting approval to it provisionally for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the fund or trust or institution or university or other educational institution or hospital or other medical institution:”;

(b) for the eighth and ninth provisos, the following provisos shall be substituted, namely:–

“Provided also that any approval granted under the second proviso shall apply in relation to the income of the fund or trust or institution or university or other educational institution or hospital or other medical institution,–

(i) where the application is made under clause (i) of the first proviso, from the assessment year from which approval was earlier granted to it;

(ii) where the application is made under clause (iii) of the first proviso, from the first of the assessment years for which it was provisionally approved;

(iii) in any other case, from the assessment year immediately following the financial year in which such application is made:

Provided also that the order under clause (i), sub-clause (b) of clause (ii) and clause (iii) of the second proviso shall be passed, in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received:”;

(B) in the tenth proviso, for the words and figures “section 288 and furnish along with the return of income for the relevant assessment year”, the words, figures and letters “section 288 before the specified date referred to in section 44AB and furnish by that date” shall be substituted;

(a) the sixteenth proviso shall be omitted;

(b) for the eighteenth proviso, the following proviso shall be substituted, namely:–

“Provided also that all applications made under the first proviso [as it stood before its amendment by the Finance Act, 2020] pending before the Principal Commissioner or Commissioner, on which no order has been passed before the date on which the first proviso has come into force, shall be deemed to be an application made under clause (iv) of the first proviso on that date:”;

Clause 7 of the Bill seeks to amend section 10 of the Income-tax Act relating to incomes not included in total income.

First proviso to clause (23C) of said section provides for application to be made in prescribed form and manner to the prescribed authority for exemption in respect of income of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of said clause in a case where such income is applied or accumulated during the previous year for certain purposes in accordance with the relevant provisions.

It is proposed to substitute said proviso so as to provide that the exemption to such fund or trust or institution or any university or other educational institution or any hospital or other medical institution shall not be available unless it is approved under the proposed second proviso on an application made in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution is approved under the second proviso (as it stood before its amendment by the Finance Act, 2020), within three months from the date on which this clause has come into force; where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution is approved and the period of such approval is set to expire, at least six months prior to expiry of said period; where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution has been provisionally approved, at least six months prior to expiry of period of the provisional approval or within six months of commencement of its activities, whichever is earlier; in any other case, at least one month prior to commencement of the previous year relevant to the assessment year from which said registration is sought.

Second proviso to clause (23C) of said section thereof provides for the inquiry to be made by the prescribed authority before approving the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of said clause.

It is proposed to substitute the second proviso so as to provide that the Principal Commissioner or Commissioner, on receipt of an application made under the proposed first proviso, shall, where the application is under clause (i) of said proviso, pass an order in writing granting it approval for a period of five years; where the application is under clause (ii) or clause (iii) of said proviso, call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about, the genuineness of activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution and the compliance of such requirements of any other law for the time being in force by it as are material for the purpose of achieving its object; and after satisfying himself about the objects and the genuineness of its activities, under item (A), and compliance of the requirements under item (B), of sub-clause (a), pass an order in writing granting its approval for a period of five years; if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its approval after affording it a reasonable opportunity of being heard; where the application is under clause (iv) of said proviso, pass an order in writing granting it approval provisionally for a period of three yearsfrom the assessment year from which the registration is sought, and send a copy of such order to the fund or trust or institution or any university or other educational institution or any hospital or other medical institution.

Eighth proviso to clause (23C) thereof, inter alia, provides for period for which a notification issued by Central Government under sub-clause (iv) or sub-clause (v) of said clause shall have effect.

It is proposed to substitute the eighth proviso so as to provide that the approval granted under the proposed second proviso shall apply in relation to the income of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, where the application is made under clause (i) of the first proviso, from the assessment year from which approval was earlier granted to it; where the application is made under clause (iii) of the first proviso, from the first of the assessment years for which it was provisionally approved; in any other case, from the assessment year immediately following the financial year in which such application is made.

Ninth proviso to clause (23C) of said section thereof, inter alia, provides for the period within which a notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall be granted or an order rejecting the application made in this behalf shall be passed.

It is proposed to substitute the ninth proviso so as to provide that the order under clause (i), sub-clause (b) of clause (ii) and clause (iii) of the proposed second proviso shall be passed, in such form and manner as may be prescribed, before expiry of period of three months, six months and one month respectively, calculated from the end of the month in which the application was received.

These amendments will take effect from 1st June, 2020.

The tenth proviso to the said clause provides that where the total income, of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), without giving effect to the provisions of the said sub-clauses, exceeds the maximum amount which is not chargeable to tax in any previous year, such trust or institution or university or other educational institution or hospital or other medical institution shall get its accounts audited in respect of that year by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnish the report of such audit along with the return of income for the relevant assessment year.

It is proposed to amend the said proviso so as to provide that such trust or institution or university or other educational institution or hospital or other medical institution should get the accounts audited before the specified date referred to in section 44AB (i.e. one month prior to the due date for filing of return under sub-section (1) of section 139) and furnish the report of audit by that date.

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.

Sixteenth proviso to clause (23C) of said section thereof, inter alia, provides for the period within which application for exemption has to be made by the fund or trust or institution or any university or other educational institution or any hospital or other medical institution under the first proviso.

It is proposed to omit the said proviso.

It is further proposed to substitute the existing eighteenth proviso so as to provide that all applications made under the existing first proviso, pending before the Principal Commissioner or Commissioner, on which no order has been passed, shall be deemed to be an application made under clause (iv) of the proposed first proviso on that date.

These amendments will take effect from 1st June, 2020.

Amendment of section 11.

9. In section 11 of the Income-tax Act, in sub-section (7), with effect from the 1st day of June, 2020,–

(a) for the words, brackets, letters and figures “under clause (b) of sub-section (1) of section 12AA”, the words, figures and letters “under section 12AA or section 12AB” shall be substituted;

(b) for the words, brackets, figures and letter “clause (1) and clause (23C)”, the words, brackets, figures and letter “clause (1), clause (23C) and clause (46)” shall be substituted;

“Provided that such registration shall become inoperative from the date on which the trust or institution is approved under clause (23C) of section 10 or is notified under clause (46) of the said section, as the case may be, or the date on which this proviso has come into force, whichever is later:

Provided further that the trust or institution, whose registration has become inoperative under the first proviso, may apply to get its registration operative under section 12AB subject to the condition that on doing so, the approval under clause (23C) of section 10 or notification under clause (46) of the said section, as the case may be, to such trust or institution shall cease to have any effect from the date on which the said registration becomes operative and thereafter, it shall not be entitled to exemption under the respective clauses.”.

Clause 9 of the Bill seeks to amend section 11 of the Income-tax Act relating to income from property held for charitable or religious purposes.

Sub-section (7) of said section provides that where a trust or an institution has been granted registration under clause (b) of sub-section (1) of section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996] and the said registration is in force for any previous year, then, nothing contained in section 10 [other than clause (1) and clause (23C) thereof] shall operate to exclude any income derived from the property held under trust from the total income of the person in receipt thereof for that previous year.

It is proposed to amend said sub-section so as to substitute the reference to “clause (b) of sub-section (1) of section 12AA” to “section 12AA, and section 12AB”.

It is further proposed to insert a proviso to said subsection so as to provide that the registration referred therein shall become inoperative from the date on which the trust or institution is approved under clause (23C), or is notified under clause (46) of section 10, as the case may be, or the date on which this proviso comes into force, whichever is later.

It is further proposed to insert another proviso to said sub-section so as to provide that the trust or institution, whose registration has become inoperative under the proposed first proviso, may apply to get its registration operative under proposed section 12AB subject to the condition that on doing so, the approval under clause (23C) or notification under clause (46) of section 10, as the case may be, to such trust or institution shall cease to have any effect from the date on which the said registration becomes operative and thereafter, it would not be entitled to exemption under the respective clause.

These amendments will take effect from 1st June, 2020.

Amendment of section 12A.
10. In section 12A of the Income-tax Act,–
(I) in sub-section (1),–

(A) after clause (ab), the following clause shall be inserted with effect from the 1st day of June, 2020, namely:–

“(ac) notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution,–

(i) where the trust or institution is registered under section 12A [as it stood immediately before its amendment by the Finance (No. 2) Act, 1996] or under section 12AA, [as it stood immediately before its amendment by the Finance Act, 2020] within three months from the date on which this clause has come into force;

(ii) where the trust or institution is registered under section 12AB and the period of the said registration is due to expire, at least six months prior to expiry of the said period;

(iii) where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier;

(iv) where registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11, at least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative;

(v) where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of the said adoption or modification;

(vi) in any other case, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought,

and such trust or institution is registered under section 12AB;”;

(B) in clause (b), for the words “and the person in receipt of the income furnishes along with the return of income for the relevant assessment year”, the words, figures and letters “before the specified date referred to in section 44AB and the person in receipt of the income furnishes by that date” shall be substituted;

(II) in sub-section (2), with effect from the 1st day of June, 2020,–

(A) in the first proviso, for the words “Provided that", the following shall be substituted, namely:–

“Provided that the provisions of sections 11 and 12 shall apply to a trust or institution, where the application is made under–

(a) sub-clause (i) of clause (ac) of sub-section (1), from the assessment year from which such trust or institution was earlier granted registration;

(b) sub-clause (iii) of clause (ac) of sub-section (1), from the first of the assessment years for which it was provisionally registered:

Provided further that”;

(B) in the second proviso, for the words “Provided further”, the words “Provided also” shall be substituted;

(C) in the first and third provisos, after the word, figures and letters “section 12AA”, the words, figures and letters “or section 12AB” shall be inserted.

Clause 10 of the Bill seeks to amend section 12A of the Income-tax Act relating to conditions for applicability of sections 11 and 12.

Sub-section (1) of said section provides for the conditions to be fulfilled by any trust or institution subject to which exemption under sections 11 and 12 shall be available to it.

It is proposed to insert a new clause (ac) to the said sub-section so as to provide, notwithstanding anything contained in clauses (a), (aa) and (ab) of the said subsection, with condition that the trust or institution is registered under the proposed section 12AB on an application made by the person in receipt of the income in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution; where the trust or institution is registered under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] or under section 12AA, within three months from the date on which this clause has come into force; where the trust or institution is registered under section 12AB and the period of said registration is set to expire, at least six months prior to expiry of said period; where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier; where registration of the trust or institution has become inoperative due to proviso to sub-section (7) of section 11, at least six months prior to commencement of the assessment year from which said registration is sought to be made operative; where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of said adoption or modification, in any other case, at least one month prior to commencement of the previous year relevant to the assessment year from which said registration is sought.

This amendment will take effect from 1st June, 2020.

It is further proposed to consequentially amend clause (b) of sub-section (1) of the said sectionso as to provide that such trust or institution should get the accounts audited by the accountant as defined in Explanation below sub-section (2) of section 288 before the specified date referred to in section 44AB (i.e. one month prior to the due date for filing of return under sub-section (1) of section 139) and furnish the report of such audit by that date.

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.

Sub-section (2) of said section provides that an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.

It is proposed to insert first proviso to said sub-section so as to provide that the provisions of sections 11 and 12 shall apply to a trust or institution, where the application is made under sub-clause (i) of proposed clause (ac) of sub-section (1), from the assessment year from which such trust or institution was earlier granted registration; sub-clause (iii) of proposed clause (ac) of sub-section (1), from the first of the assessment years for which it was provisionally registered.

It is proposed to amend the existing first and third proviso to sub-section (2) thereof so as to make reference of proposed new section 12AB.

This amendment will take effect from 1st June, 2020.

Amendment of section 12AA.

11. In section 12AA of the Income-tax Act, after sub-section (4), the following sub-section shall be inserted with effect from the 1st day of June, 2020, namely:–

“(5) Nothing contained in this section shall apply on or after the 1st day of June, 2020.”.

Clause 11 of the Bill seeks to amend section 12AA of the Income-tax Act relating to procedure for registration.

It is proposed to insert a new sub-section (5) to said section so as to provide that nothing contained in said section shall apply on or after the 1st day of April, 2021.

This amendment will take effect from 1st June, 2020.

Insertion of new section 12AB.

Procedure for fresh registration.

12. After section 12AA of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2020, namely:–

“12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,

(a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years;

(b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of the said clause,–

(i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about-

(A) the genuineness of activities of the trust or institution; and

(B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; and

(ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A), and compliance of the requirements under item (B), of sub-clause (i),–

(A) pass an order in writing registering the trust or institution for a period of five years;

(B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard;

(c) where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought,

and send a copy of such order to the trust or institution.

(2) All applications, pending before the Principal Commissioner or Commissioner on which no order has been passed under clause (b) of sub-section (1) of section 12AA before the date on which this section has come into force, shall be deemed to be an application made under sub-clause (vi) of clause (ac) of sub-section (1) of section 12A on that date.

(3) The order under clause (a), sub-clause (ii) of clause (b) and clause (c), of sub-section (1) shall be passed, in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received.

(4) Where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording a reasonable opportunity of being heard.

(5) Without prejudice to the provisions of sub-section (4), where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, it is noticed that–

(a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or

(b) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution.”.

Clause 12 of the Bill seeks to insert a new section 12AB in the Income-tax Act relating to procedure for fresh registration.

Sub-section (1) of the proposed section provides that the Principal Commissioner or Commissioner, on receipt of an application made under the proposed clause (ac) of sub-section (1) of section 12A, shall send a copy of order passed in writing, to the trust or institution, where the application is under sub-clause (i) of the said clause, registering the trust or institution for a period of five years; where the application is under sub-clause (ii), the sub-clause (iii), sub-clause (iv) or sub-clause (v) of said clause,-

(i) call for such documents or information from the trust or institution or making such inquiries as he thinks necessary in order to satisfy himself about,—

(A) the genuineness of activities of the trust or institution; and

(B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its object; and

(ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, under item (A), and compliance of the requirements under item (B), of sub-clause (i),–

(A) registering the trust or institution for a period of five years;

(B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling the registration of such trust or institution after affording a reasonable opportunity of being heard;

(C) where the application is under sub-clause (vi) of the said clause, provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought.

Sub-section (2) of the proposed section provides that all applications, pending before the Principal Commissioner or Commissioner on which no order has been passed under clause (b) of sub-section (1) of section 12AA before the date on which this section will come into force, shall be deemed to be an application made under proposed sub-clause (vi) of clause (ac) of sub-section (1) of section 12A on that date.

Sub-section (3) of the proposed section provides that the order under clause (a), sub-clause (ii) of clause (b) and clause (c) of sub-section (1) shall be passed, in such form and manner as may be prescribed, before the expiry of the period of three months, six months and one month respectively, calculated from the end of the month in which the application was received.

Sub-section (4) of the proposed section provides that where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording a reasonable opportunity of being heard.

Sub-section (5) of the proposed section provides that without prejudice to the provisions of sub-section (4), where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, it is noticed that,–

This amendment will take effect from 1st June, 2020.

Amendment of section 35.

17. In section 35 of the Income-tax Act, with effect from the 1st day of June, 2020,–

(i) in sub-section (1),–

(a) after sub-clause (iii), in the Explanation, for the words, brackets and figures,–

(A) “to which clause (ii) or clause (iii)”, the words, brackets, figures and letter “to which clause (ii) or clause (iii) or to a company to which clause (iia)” shall be substituted;

(B) “clause (ii) or clause (iii)”, the words, brackets, figures and letter “clause (ii) or clause (iii) or to a company referred to in clause (iia)” shall be substituted;

(b) after the fourth proviso occurring after clause (iv), the following provisos shall be inserted, namely:–

“Provided also that every notification under clause (ii) or clause (iii) in respect of the research association, university, college or other institution or under clause (iia) in respect of the company issued on or before the date on which this sub-section has come into force, shall be deemed to have been withdrawn unless such research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) makes an intimation in such form and manner, as may be prescribed, to the prescribed income-tax authority within three months from the date on which this proviso has come into force, and subject to such intimation the notification shall be valid for a period of five consecutive assessment years beginning with the assessment year commencing on or after the 1st day of April, 2021:

Provided also that any notification issued by the Central Government under clause (ii) or clause (iia) or clause (iii), after the date on which the Finance Bill, 2020 receives the assent of the President, shall, at any one time, have effect for such assessment year or years, not exceeding five assessment years as may be specified in the notification.”;

(ii) after sub-section (1), the following sub-section shall be inserted, namely:––

“(1A) Notwithstanding anything contained in sub-section (1), the research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) of sub-section (1) shall not be entitled to deduction under the respective clauses of the said sub-section, unless such research association, university, college or other institution or company–

(i) prepares such statement for such period as may be prescribed and deliver or cause to be delivered to the said prescribed income-tax authority or the person authorised by such authority such statement in such form, verified in such manner, setting forth such particulars and within such time, as may be prescribed:

Provided that such research association, university, college or other institution or the company may also deliver to the prescribed authority a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be prescribed; and

(ii) furnishes to the donor, a certificate specifying the amount of donation in such manner, containing such particulars and within such time from the date of receipt of sum, as may be prescribed.”.

Clause 17 of the Bill seeks to amend section 35 of the Income-tax Act relating to expenditure on scientific research.

Sub-section (1) of said section provides that the expenditures on scientific research in respect of which, the deductions shall be allowed. Clause (ii) of said sub-section provides that the deduction for any sum paid to a research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research, clause (iia) of said sub-section provides that any sum paid to a company to be used by it for scientific research, and clause (iii) of said sub-section provides that any sum paid to a research association which has as its object the undertaking of research in social science or statistical research or to a university, college or other institution to be used for research in social science or statistical research. Explanation of said clause provides that assessee shall not be denied the deduction in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn.

It is proposed to amend the said Explanation so as to provide that the assessee shall not be denied the deduction in respect of any sum paid to a company referred to in clause (ii) which it is entitled to, merely on the ground that, subsequent to the payment of such sum, the approval granted to the company has been withdrawn.

It is further proposed to insert a new fifth proviso to said sub-section (1) so as to provide that every notification under clause (ii) or clause (iii) in respect of the research association, university, college or other institution or under clause (iia) in respect of the company issued on or before the date on which this proviso comes into effect, shall be deemed to have been withdrawn unless such research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) makes an intimation in such form and manner to the prescribed authority within three months from the date on which this proviso has come into effect, and subject to such intimation the notification shall be valid for a period of five consecutive assessment years beginning with the assessment year commencing on or after the 1st day of April, 2021.

It is also proposed to insert a new sixth proviso to said sub-section (1) so as to provide that any notification issued, by the Central Government under clause (ii), clause (iia) or clause (iii), after the date on which the Finance Bill, 2020 receives the assent of the President, shall, at any one time, have effect for such assessment year or years, not exceeding five assessment years as may be specified in the notification.

It is also proposed to insert a new sub-section (1A) in the said section after sub-section (1) thereof so as to provide that notwithstanding anything contained in sub-section (1), the research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) of sub-section (1) shall not be entitled to deduction under respective clause of said sub-section, unless such research association, university, college or other institution or company,–

(a) prepares such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed, and it may also file a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be provided by rules; and

(b) furnishes to the donor, a certificate specifying the amount of donation in such manner, containing such particulars and within such time from the date of receipt of sum, as may be prescribed.

These amendments will take effect from 1st June, 2020.

Amendment of section 56.

29. In section 56 of the Income-tax Act, in sub-section (2),––

(A) with effect from the 1st day of June, 2020,––

(i) in clause (v), in the proviso, in clause (g), for the word, figures and letters “section 12AA”, the words, figures and letters “section 12AA or section 12AB” shall be substituted;

(ii) in clause (vi), in the proviso, in clause (g), for the word, figures and letters “section 12AA”, the words, figures and letters “section 12AA or section 12AB” shall be substituted;

(iii) in clause (vii), in the second proviso, in clause (g), for the word, figures and letters “section 12AA”, the words, figures and letters “section 12AA or section 12AB” shall be substituted;

(B) in clause (x),–

(i) in sub-clause (b), in item (B), in sub-item (ii), for the words “five per cent.”, the words “ten per cent.” shall be substituted with effect from the 1st day of April, 2021;

(ii) in the proviso, in clause (VII), for the words, letters and figures “section 12A or section 12AA”, the words, figures and letters “section 12A or section 12AA or section 12AB” shall be substituted with effect from the 1st day of June, 2020.

Clause 29 of the Bill seeks to amend section 56 of the Income-tax Act relating to income from other sources.

Clause (x) of said sub-section provides that where any sum of money exceeding fifty thousand rupees received without consideration or any movable property or immovable property for without consideration or with consideration and difference with market value exceeds fifty thousand rupees by any person from any person on or after the 1st day of April, 2017, the whole of such sum shall be chargeable to income-tax. Clause (VII) of the first proviso to clause (x) provides that the clause shall not apply to any sum of money received from any trust or institution registered under section 12A or section 12AA.

It is proposed to make a reference to section 12AB in the clauses (v), (vi), (vii) and clause (x) of sub-section (2) so as to provide that the said clauses shall not apply to any sum of money received from any trust or institution registered under section 12AB of the Income-tax Act.

It may be noted that clauses (v), (vi) and (vii) were not applicable as on 1^st April, 2019. Hence the amendment in clause(x) is only having the effect of the amendment.

These amendments will take effect from 1st June, 2020.

Amendment of section 80G.

33. In section 80G of the Income-tax Act, with effect from the 1st day of June, 2020,––

(i) in sub-section (5),–

(a) in clause (vi), for the words “approved by the Commissioner in accordance with the rules made in this behalf; and”, the words “approved by the Principal Commissioner or Commissioner;” shall be substituted;

(b) after sub-clause (vii), the following shall be inserted, namely:–

“(viii) the institution or fund prepares such statement for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed:

Provided that the institution or fund may also deliver to the said prescribed authority a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be prescribed; and

(ix) the institution or fund furnishes to the donor, a certificate specifying the amount of donation in such manner, containing such particulars and within such time from the date of receipt of donation, as may be prescribed:

Provided that the institution or fund referred to in clause (vi) shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,–

(i) where the institution or fund is approved under clause (vi) [as it stood immediately before its amendment by the Finance Act, 2020], within three months from the date on which this proviso has come into force;

(ii) where the institution or fund is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period;

(iii) where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier;

(iv) in any other case, at least one month prior to commencement of the previous year relevant to the assessment year from which the said approval is sought:

Provided further that the Principal Commissioner or Commissioner, on receipt of an application made under the first proviso, shall,—

(i) where the application is made under clause (i) of the said proviso, pass an order in writing granting it approval for a period of five years;

(ii) where the application is made under clause (ii) or clause (iii) of the said proviso,–

(a) call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about—

(A) the genuineness of activities of such institution or fund; and

(B) the fulfilment of all the conditions laid down in clauses (i) to (v); and

(b) after satisfying himself about the genuineness of activities under item (A), and the fulfilment of all the conditions under item (B), of sub-clause (a),–

(A) pass an order in writing granting it approval for a period of five years;

(B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its approval after affording it a reasonable opportunity of being heard;

(iii) where the application is made under clause (iv) of the said proviso, pass an order in writing granting it approval provisionally for a period of three years from the assessment year from which the registration is sought,

and send a copy of such order to the institution or fund:

Provided also that the order under clause (i), sub-clause (b) of clause (ii) and clause (iii) of the first proviso shall be passed in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received:

Provided also that the approval granted under the second proviso shall apply to an institution or fund, where the application is made under–

(a) clause (i) of the first proviso, from the assessment year from which approval was earlier granted to such institution or fund;

(b) clause (iii) of the first proviso, from the first of the assessment years for which such institution or fund was provisionally approved;

(c) in any other case, from the assessment year immediately following the financial year in which such application is made.”;

(ii) in sub-section (5D), after Explanation 2, the following Explanation shall be inserted, namely:–

“Explanation 2A.— For the removal of doubts, it is hereby declared that claim of the assessee for a deduction in respect of any donation made to an institution or fund to which the provisions of sub-section (5) applies, in the return of income for any assessment year filed by him, shall be allowed on the basis of information relating to said donation furnished by the institution or fund to the prescribed income-tax authority or the person authorised by such authority, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.”;

(iii) after sub-section (5D), the following sub-section shall be inserted, namely:–– “(5E) All applications, pending before the Commissioner on which no order has been passed under clause (vi) of sub-section (5) before the date on which this sub-section has come into force, shall be deemed to be applications made under clause (iv) of the first proviso to sub-section (5) on that date.”.

Clause 33 of the Bill seeks to amend section 80G of the Income-tax Act relating to deduction in respect of donations to certain funds, charitable institutions, etc.

Sub-section (5) thereof provides that this section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils certain conditions.

Clause (vi) of said sub-section provides one of the conditions to be that in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf.

It is proposed to amend said sub-section so as to provide additional conditions as under:-

(a) the institution or fund prepares such statement for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed and it may also deliver to the said prescribed authority a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be provided by rules; and

(b) the institution or fund furnishes to the donor, a certificate specifying the amount of donation in such manner, containing such particulars and within such time from the date of receipt of donation, as may be provided by rules.

It is also proposed to insert a proviso to said sub-section (5) so as to provide that the institution or fund referred to in clause (vi) thereof shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,–

(a) where the institution or fund is approved under clause (vi)(as it stood before its amendment by the Finance Act, 2020), within three months from the date on which this proviso has come into force;

(b) where the institution or fund is approved and the period of such approval is about to expire, at least six months prior to expiry of said period;

(c) where the institution or fund has been provisionally approved, at least six months prior to expiry of period of the provisional approval or within six months of commencement of its activities, whichever is earlier;

(d) in any other case, at least one month prior to commencement of the previous year relevant to the assessment year from which said registration is sought.

It is also proposed to insert another proviso to sub-section (5) so as to provide that the Principal Commissioner or Commissioner, on receipt of an application made under the proposed first proviso, shall send a copy of order passed in writing,—

(a) where the application is under clause (i) of the said proviso, granting it approval for a period of five years;

(b) where the application is under clause (ii) or clause (iii) of the said proviso,–

I. call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about,—

(A) the genuineness of activities of such institution or fund; and

(B) the fulfilment of all the conditions laid down in clauses (i) to (v) of sub-section (5); and

II. after satisfying himself about the genuineness of activities under item (A), and the fulfilment of all the conditions under item (B), of sub-clause (a),–

(A) granting it approval for a period of five years;

(B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its approval after affording it a reasonable opportunity of being heard;

III. where the application is under clause (iv) of said proviso, granting it approval provisionally for a period of three years from the assessment year from which the registration is sought.

It is also proposed to insert another proviso to sub-section (5) so as to provide that the order under clause (i), sub-clause (b) of clause (ii) and clause (iii) of proposed first proviso shall be passed, in such form and manner as may be prescribed, before expiry of period of three months, six months and one month respectively, calculated from the end of the month in which the application was received.

It is also proposed to insert another proviso to sub-section (5) so as to provide that the approval granted under the proposed second proviso shall apply to an institution or fund, where the application is made under,-

(a) clause(i) of the proposed first proviso, from the assessment year from which approval was earlier granted to such institution or fund;

(b) clause(iii) of the proposed first proviso, from the first of the assessment years for which such institution or fund was provisionally approved;

(c) in any other case, from the assessment year immediately following the financial year in which such application is made.

It is also proposed to insert a new sub-section (5E) so as to provide that all applications, pending before the Commissioner on which no order has been passed under clause (vi) of sub-section (5) before the date on which this sub-section has come into effect, shall be deemed to be an application made under clause (iv) of the first proviso of sub-section (5) on that date.

It is also proposed to insert new Explanation 2A to declare that assessee’s claim for a deduction in respect of any donation made to an institution or fund to which subsection (5) applies, in the return of income for any assessment year filed by him, shall be allowed on the basis of information relating to said donation furnished by the institution or fund to the income-tax authority or the person authorised by such authority, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.

These amendments will take effect from 1st June, 2020.

Amendment of section 80GGA.

34. In section 80GGA of the Income-tax Act, with effect from the 1st day of June, 2020,––

(i) in sub-section (2A), for the words “ten thousand rupees”, the words “two thousand rupees” shall be substituted;

(ii) after sub-section (4), the following Explanation shall be inserted, namely:–– “Explanation.––For the removal of doubts, it is hereby declared that the claim of the assessee for a deduction in respect of any sum referred to in sub-section (2) in the return of income for any assessment year filed by him, shall be allowed on the basis of information relating to such sum furnished by the payee to the prescribed income-tax authority or the person authorised by such authority, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.”.

Clause 34 of the Bill seeks to amend section 80GGA of the Income-tax Act relating to deduction in respect of certain donations for scientific research or rural development.

Sub-section (2A) of said section provides that no deduction shall be allowed under this section in respect of any sum exceeding ten thousand rupees unless such sum is paid by any mode other than cash.

It is proposed to insert an Explanation to said section so as to declare that assessee’s claim for a deduction in respect of any sum referred to in sub-section (2), in the return of income for any assessment year filed by him, shall be allowed on the basis of information relating to such sum furnished by the payee to the prescribed income-tax authority or the person authorised by such authority, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.

This amendment will take effect from 1st June, 2020.

Amendment of section 115TD.

61. In section 115TD of the Income-tax Act, for the words, figures and letters “under section 12AA” wherever they occur, the words, figures and letters “under section 12AA or section 12AB” shall be substituted with effect from the 1st day of June, 2020.

Clause 61 of the Bill seeks to amend section 115TD of the Income-tax Act relating to tax on accreted income.

Sub-section (1) of the said section provides for payment of additional income-tax on the specified date by the name tax on accreted income, notwithstanding anything contained in that Act, to be paid at the maximum marginal rate where in any previous year, a trust or institution register under section 12AA has converted into any form which is not eligible for grant of registration under section 12AA; merged with any entity other than an entity which is a trust or institution having objects similar to it and registered under section 12AA or section 12AB; or failed to transfer upon dissolution all its assets to any other trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, within a period of twelve months from the end of the month in which the dissolution takes place.

Other provisions of aforesaid section provides for procedures in relation to payment of said additional income-tax.

It is proposed to make a reference to section 12AB in the said section, wherever the reference to section 12AA has been made so as to provide that provisions of said section 115TD shall, mutatis mutandis, apply to the trust or institution registered under section 12AB.

This amendment will take effect from 1st June, 2020.

Insertion of new section 234G.

Fee for default relating to statement or certificate

94. After section 234F of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2020, namely:––

“234G. (1) Without prejudice to the provisions of this Act, where,–

(a) the research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) of sub-section (1) of section 35 fails to deliver or cause to be delivered a statement within the time prescribed under clause (i), or furnish a certificate prescribed under clause (ii) of sub-section (1A) of that section; or .

(b) the institution or fund fails to deliver or cause to be delivered a statement within the time prescribed under clause (viii) of sub-section (5) of section 80G, or furnish a certificate prescribed under clause (ix) of the said sub-section,

it shall be liable to pay, by way of fee, a sum of two hundred rupees for every day during which the failure continues.

(2) The amount of fee referred to in sub-section (1) shall,–

(a) not exceed the amount in respect of which the failure referred to therein has occurred;

(b) be paid before delivering or causing to be delivered the statement or before furnishing the certificate referred to in sub-section (1).”.

Clause 94 of the Bill seeks to insert a new section 234G of the Income-tax Act relating to fee for default relating to statement or certificate.

Sub-section (1) of the proposed section provides that without prejudice to the provisions of that Act, where the research association, university, college or other institution or the company fails to deliver or cause to be delivered a statement within the time prescribed under clause (i), or furnish a certificate prescribed under clause (ii) of subsection (1A) of section 35; or the institution or fund fails to deliver or cause to be delivered a statement within the time prescribed under clause (viii) of sub-section (5), or furnish a certificate prescribed under clause (ix) of sub-section (5) of section 80G; it shall be liable to pay, by way of fee, a sum of two hundred rupees for every day during which the failure continues.

Sub-section (2) of the proposed section provides that the amount of said fee shall not exceed the amount in respect of which the failure referred therein has occurred and shall be paid before delivering or causing to be delivered the statement mentioned in sub-section (1).

This amendment will take effect from 1st June, 2020.

Amendment of section 253.

96. In section 253 of the Income-tax Act, in sub-section (1), in clause (c), for the words, figures and letters “under section 12AA”, the words, figures and letters “under section 12AA or section 12AB” shall be substituted with effect from the 1st day of June, 2020.

Clause 96 of the Bill seeks to amend section 253 of the Income-tax Act relating to appeals to the Appellate Tribunal.

Sub-section (1) of the said section provides for appeal by an assessee to the Appellate Tribunal against certain orders by which he is aggrieved. Clause (c) of said section provides one such order to be an order passed by a Principal Commissioner or Commissioner under section 12AA.

It is proposed to make a reference to section 12AB in the said clause so as to provide that assessee, if he is aggrieved, may appeal to the Appellate Tribunal against order passed by a Principal Commissioner or Commissioner under section 12AB, as well.

The proposed amendment is consequential to the insertion of a new section 12AB in the Income-tax Act which provides the procedure for registration of a trust or institution.

These amendments will take effect from 1st June, 2020.

Insertion of new section 271K

Penalty for failure to furnish statements, etc.
99. After section 271J of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2020, namely:–
“271K. Without prejudice to the provisions of this Act, the Assessing Officer may direct that a sum not less than ten thousand rupees but which may extend to one lakh rupees shall be paid by way of penalty by––

(i) the research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia), of sub-section (1) of section 35, if it fails to deliver or cause to be delivered a statement within the time prescribed under clause (i), or furnish a certificate prescribed under clause (ii) of sub-section (1A) of that section; or

(ii) the institution or fund, if it fails to deliver or cause to be delivered a statement within the time prescribed under clause (viii) of sub-section (5) of section 80G, or furnish a certificate prescribed under clause (ix) of the said sub-section.”.

Clause 99 of the Bill seeks to insert a new section 271K in the Income-tax Act relating to penalty for failure to furnish statements, etc.

The proposed section provides that without prejudice to the provisions of that Act, the Assessing Officer may direct that a sum not less than ten thousand rupees but extending to one lakh rupees shall be paid by way of penalty by, the research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) of sub-section (1), if it fails to deliver or cause to be delivered a statement within the time prescribed under clause (i), or furnish a certificate prescribed under clause (ii) of sub-section (1A) of section 35 of the Income-tax Act; or the institution or fund, if it fails to deliver or cause to be delivered a statement within the time prescribed under clause (viii) of sub-section (5), or furnish a certificate prescribed under clause (ix) of sub-section (5) of section 80G.

This amendment will take effect from 1st June, 2020.

Comprehensive list of Clause wise Amendments in the Income Tax Act, 1961 related to Trust and Institutions by Finance Bill, 2020

*Clause*	*Nature*	*Topic*	*Effective from*
7(I)(A)	Amendment of section 10(23C)	Provisions for a fund, trust or institution, university or other educational institution, hospital or other medical institution rationalized	01.06.2020
7(I)(B)	Amendment of section 10(23C)	Audit Report cannot be filed along with return of income and shall be filed before the specified date referred to in section 44AB	01.06.2020
7(I)(C)	Amendment of section 10(23C)	Provisions for a fund, trust or institution, university or other educational institution, hospital or other medical institution rationalized	01.06.2020
7(II)(a)	Amendment of section 10(23D)	Consequential amendment subsequent to abolishment of DDT	AY 2021-22
7(II)(b)	Amendment of section 10(2FC)	Consequential amendment subsequent to abolishment of DDT	AY 2021-22
7(II)(c)	Amendment of section 10(23FD)	Consequential amendment subsequent to abolishment of DDT	AY 2021-22
7(II)(d)	Amendment of section 10(23FE)-New clause inserted	Exemption provided to a wholly owned subsidiary of ADIA and Sovereign Wealth Fund	AY 2021-22
9(a)	Amendment of section 11(7)	Registration of a Trust u/s 12AB is included	01.06.2020
9(b)	Amendment of section 11(7)	A trust under section 10(23C)(1) is covered, now section 10(46) is also included.	01.06.2020
9(c)	Amendment of section 11(7)-New provisos inserted	First proviso: Registration of a Trust to become inoperative if approved under section 10(23C) or notified under section 10(46). Second Proviso: Such a Trust can apply for registration u/s 12AB subject to specified conditions	01.06.2020
10(I)(A)	Amendment of section 12A	Provisions related to revalidation and renewal of registration introduced and shifting to section 12AB	01.06.2020
10(I)(B)	Amendment of section 12A	Audit Report cannot be filed along with return of income and shall be filed before the specified date referred to in section 44AB	01.06.2020
10(II)	Amendment of section 12A	Provisions for a trust or institution rationalized	01.06.2020
11	Amendment of section 12AA	New sub-section (5) inserted to provide that Section 12AA shall be inapplicable from 01.06.2020	01.06.2020
12	Insertion of new section 12AB	Contains the procedure of new or fresh Registration of a Charitable Trust or a Religious Trust	01.06.2020
17(i)(a) (A) & (B)	Amendment of section 35(1)	The Explanation after clause (iii) shall now to include a company referred to in clause(iia) in additions to institutions covered under clause (ii) and clause (iii)	01.06.2020
17(i)(b)	Amendment of section 35(1)	Two new provisos have been inserted-namely fifth proviso and sixth proviso. Fifth proviso: An existing institution notified under section 35(1)(ii)/(iia)/(iii) shall be required to intimate about the notification in the prescribed form and manner within 31.08.2020 else their notification will be withdrawn. It is further provided that once intimated the notification shall remain valid for 5 years from AY 2021-22. Sixth proviso: Henceforth, any notification issued under clause (ii)/(iia)/(iii) shall remain valid for 5 years.	01.06.2020
17(ii)	Amendment of section 35(1A)-New sub-section inserted	Provides for filing of statement of contributions received and furnishing certificate to the donor	01.06.2020
29(A) (i)/(ii)/(iii)	Amendment of section 56(2)	Amendments in clause (v)/(vi)/(vii) [clause(g) to proviso to these clauses] - To provide for any sum of money received from any trust or institution registered under section 12AA shall not be considered as income. Now section 12AB inserted. Note: None of the clauses (v)/(vi)/(vii) is applicable for AY 2020-21.	01.06.2020
29(B)(i)	Amendment of section 56(2)(x)	Clause(b)(B)(ii): Variation of actual sales consideration with stamp duty value upto 10 percent is allowed. Note: Not an amendment directly related to Trust or institution, but retained to maintain sequence	AY 2021-22
29(B)(ii)	Amendment of section 56(2)(x)	Clause (VII) of the first proviso to clause(x) - Provides for any sum of money received from any trust or institution registered under section 12AA shall not be considered as income. Now section 12AB inserted.	01.06.2020
33(i)(a)	Amendment of section 80G(5)	Power to approve institution or fund u/s 80G(5)(vi) widened to cover Principal Commissioner also.	01.06.2020
33(i)(b)	Amendment of section 80G(5) (viii) and (ix)-New sub-clauses inserted	Provides for filing of statement of contributions received and furnishing certificate to the donor It is further provided for renewal of existing approval of an institution or fund u/s 80G(5)(vi) within 31.08.2020. The procedure for fresh and renewal, as well as provisional approval, is prescribed.	01.06.2020
33(ii)	Amendment of section 80G(5D)-New Explanation 2A inserted	Deduction for donation to an institution or fund approved u/s 80G(5) will be available to a donor only on the basis of online information.	01.06.2020
33(iii)	Amendment of section 80G(5E)-New sub-section inserted	Any pending application for registration shall be deemed to be an application made under the new rules.	01.06.2020
34(i)	Amendment of section 80GGA(2A)	Cash limit of donation limited to Rs. 2,000	01.06.2020
34(ii)	Amendment of section 80GGA-Explanation to sub-section (4) inserted	Deduction for donation u/s 80GGA will be available to a donor only on the basis of online information.	01.06.2020
61	Amendment of section 115TD	Now a trust or institution registered under section 12AB is also covered.	01.06.2020
94	Insertion of new section 234G	Late Fees prescribed for late filing of statement prescribed under section 35 and 80G and issue of certificates there under	01.04.2020
96	Amendment of section 253	A trust or institution registered under section 12AB is now covered.	01.06.2020
99	Insertion of new section 271J	Penalty prescribed for late filing of statement prescribed under section 35 and 80G and issue of certificates there under	01.06.2020

Suggested Readings:
Section 115BAC Option of New Tax to Employee and TDS by Employer
Salary to include Provident Fund Contribution as Perks-Budget 2020
Tax Audit Due Date Prescribed and Return Filing Due Date Extended-Budget 2020
New Section 271AAD – Penalty for Fake Invoice, False and Omitted entries
Changes in TDS and TCS Provisions in Union Budget 2020

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