CBDT vide Notification No. 45/2023 in G.S.R. 457(E) dated 23.06.2023 through Income-tax (Eleventh Amendment) Rules, 2023 has amended Rule 2C, Rule 11AA, and Rule 17A and various forms viz., Form No. 10A, Form No. 10AB, Form No. 10AC, Form No. 10AD, Form No. 10B and Form No. 10BB related to Charitable Trusts and NGOs effective from 1st October 2023.
These Rules and Forms have been amended in order to incorporate the amendments made by the Finance Act 2023 related to charitable and/or religious trusts or institutions registered/approved under Sections 10(23C), 80G and 12A of the Income-tax Act, 1961 (‘Act’).
The Finance Act 2023 amended provisions of Section 10(23C), Section 12A and Section 80G to allow a trust or fund or institution which has commenced activities for direct final registration and/or approval without applying for provisional registration/approval.
Changes or Amendments in Rule 2C, Rule 11AA and Rule 17A
In these Rules, certain words were substituted and added.
Amendment in Rule 2C
Rule 2C prescribes furnishing of application for the purpose of grant of approval of a fund or trust or institution or university or any hospital or other medical institution under clause (i) or clause (ii) or clause (iii) or clause (iv) of first proviso to clause (23C) of Section 10 of the Act in Form No. 10A or in Form No. 10AB.
Rule 2C(1)(i) specifies that an application for grant of approval of a fund or trust or institution or university or any hospital or other medical institution covered under clause (i) or clause (iv) of first proviso to clause (23C) of section 10 shall be made in Form No. 10A.
The pre-amended clause (iv) of first proviso to section 10(23C) provides for the filing of an application for a grant of approval in Form No. 10A in case of the establishment of a new fund or trust or institution or university or any hospital or other medical institution. No distinguishment was made whether the new fund has already commenced its activities or not at the time of filing the application in Form No. 10A. As a result, even a newly established fund or trust which has commenced its activities at the time of filing of an application was getting provisional approval for a period of three years compared to a regular fund or trust who is getting approval for a period of five years.
Hence this clause (iv) is amended by Finance Act, 2023 and a new fund is divided into two categories, one, which has commenced the activities at the time of filing of activities and a second one, which has not commenced activities at the time of filing of an application in Form No. 10A and for which two new sub-clauses (A) and (B) is inserted in of clause (iv) of the first proviso to section 10(23C) respectively.
This provides relief to those newly established funds or trusts which has commenced activities from undue hardships for reapplying immediately for regular approval after getting provisionally registered. A newly established fund or trust which has commenced activities will now be able to apply directly for regular approval.
This also covers a fund or trust which was already created or established but never took approval for income-tax exemption under the Income-tax Act and is seeking approval for the first time. As it has commenced its activities and is already carrying on its activities, these funds or trusts can now directly apply for regular approval.
The amendment in Rule 2C(1)(i) with this 11th Amendment Rules of 2023 makes a reference to sub-clause (A) of clause (iv) of the first proviso to section 10(23C) which requires a newly established fund or trust which has not commenced its activities at the time of filing of an application shall apply for approval in Form No. 10A and provisional approval will be granted to such trust or fund.
In the same line, an amendment is carried out in Rule 2C(1)(ii) to make a reference to sub-clause (B) of clause (iv) of the first proviso to section 10(23C) which requires a newly established fund or trust which has commenced its activities at the time of filing of an application shall apply for approval in Form No. 10AB and regular approval for a period of 5 years will be granted to such trust or fund after verification.
Rule 2C(7) specifies that in case of an application for a grant of provisional approval made under clause (iv) of the first proviso to clause (23C) of section 10 during the previous year beginning on 1st day of April 2021, the provisional approval shall be effective from the assessment year beginning on 1st day of April 2022 i.e. AY 2022-23.
Since clause (iv) is amended by Finance Act, 2023 hence this sub-rule (7) is amended to state that this sub-rule (7) of Rule 2C shall apply prior to the amendment in clause (iv) by the Finance Act, 2023.
The amendment in Rule 2C is prescribed in the following manner-
2. In the Income-tax Rules, 1962 (hereafter referred to as the principal rules),—
(a) in rule 2C,-
(i) in sub-rule (1), -
(I) in clause (i), for the words, brackets and figure “clause (i) or”, the words, brackets, figure and letter “clause (i) or sub-clause (A) of ” shall be substituted;
(II) in clause (ii), for the word, brackets and figures “clause (iii)”, the words, bracket, figures and letter “clause (iii) or sub-clause (B) of clause (iv)” shall be substituted;
(ii) in sub-rule (7), for the word and figures “section 10”, the words and figures “section 10 as it stood immediately before its amendment by the Finance Act, 2023,” shall be substituted;
Amendment in Rule 11AA
Similarly, an amendment is made in section 80G allowing a newly established trust or fund or an institution which has commenced activities to apply directly for regular approval under section 80G(5) in Form No. 10AB.
In this case, the amendment by the Finance Act, 2023 is carried out in clause (iv) of the first proviso to section 80G(5) and a newly established trust or fund or institution is divided into two categories, one, which has commenced the activities at the time of filing of activities and the second one, which has not commenced activities at the time of filing of an application for approval and for which two new sub-clauses (A) and (B) is inserted in of clause (iv) of the first proviso to section 80G(5) of the Act respectively.
The amendment in Rule 11AA(1)(a) with this 11th Amendment Rules of 2023 makes a reference to sub-clause (A) of clause (iv) of the first proviso to section 80G(5) which requires a newly established fund or trust or institution which has not commenced its activities at the time of filing of an application shall apply for approval in Form No. 10A and provisional approval will be granted to such trust or fund.
In the same line, an amendment is carried out in Rule 11AA(1)(ii) to make a reference to sub-clause (B) of clause (iv) of the first proviso to section 80G(5) which requires a newly established fund or trust or institution which has commenced its activities at the time of filing of an application shall apply for approval in Form No. 10AB and regular approval for a period of 5 years will be granted to such trust or fund after verification.
Rule 11AA(7) specifies that in case of an application for a grant of provisional approval made under clause (iv) of the first proviso to sub-section (5) of section 80G, the provisional approval shall be effective from the assessment year relevant to the previous year in which such application is made.
Since clause (iv) is amended by Finance Act, 2023 hence this sub-rule (7) is substituted with a new sub-rule (7) to state that this sub-rule (7) of Rule 11AA shall apply prior to the amendment in clause (iv) by the Finance Act, 2023. Further, reference to newly inserted sub-clause (A) of clause (iv) of first proviso to section 80G(5) is inserted to prescribe the applicability of the validity of the provisional approval certificate to prescribe that the provisional approval shall be effective from the assessment year relevant to the previous year in which such application is made.
The amendment in Rule 11AA is prescribed in the following manner-
2. In the Income-tax Rules, 1962 (hereafter referred to as the principal rules),—
(a) …….
(b) in rule 11AA,-
(i) in sub-rule (1),-
(I) in clause (a), for the words, brackets and figure “clause (i) or”, the words, brackets, figure and letter “clause (i) or sub-clause (A) of” shall be substituted;
(II) for clause (b), the following sub-clause shall be substituted, namely:- “(b) Form No. 10AB in case of application under clause (ii) or clause (iii) or sub-clause (B) of clause (iv) of the first proviso to sub - section (5) of section 80G to the Principal Commissioner or Commissioner authorised under the said proviso.” ;
(ii) for sub-rule (7), the following sub-rule shall be substituted, namely:-
“(7) In case of an application made under,-
(i) clause (iv) of the first proviso to sub-section (5) of section 80G as it stood immediately before its amendment vide the Finance Act, 2023,; or
(ii) sub-clause (A) of clause (iv) of first proviso to sub-section (5) of section 80G,
the provisional approval shall be effective from the assessment year relevant to the previous year in which such application is made.”;
Amendment in Rule 17A
Rule 17A prescribes furnishing of application for the purpose of grant of registration of a charitable or religious trust or institution sub-clause (i) or sub-clause(ii) or sub-clause(iii) or sub-clause(iv) or sub-clause(v) or sub-clause(vi) of clause (ac)of sub-section (1) of section 12A of the Act in Form No. 10A or in Form No. 10AB.
Rule 2C(1)(i) specifies that an application for grant of registration of a charitable or religious trust or institution covered sub-clause (i) or (vi) of clause (ac) of sub-section (1) of section 12A shall be made in Form No. 10A.
The pre-amended clause (vi) of section 12A(1)(ac) provides for the filing of an application for a grant of registration in Form No. 10A in case of the establishment of a newly established charitable or religious trust or institution. No distinguishment was made whether the new Trust has already commenced its activities or not at the time of filing the application in Form No. 10A. As a result, even a newly established Trust or NGO which has commenced its activities at the time of filing an application was getting provisional registration for a period of three years compared to a regular Trust or NGO who is getting regular registration for a period of five years.
Hence this clause (vi) is amended by Finance Act, 2023 and a newly established Trust or NGO is divided into two categories, one, which has commenced the activities at the time of filing of activities and a second one, which has not commenced activities at the time of filing of an application in Form No. 10A and for which two new sub-clauses (A) and (B) is inserted in of sub-clause (vi) to section 12A(1)(ac) respectively.
This provides relief to those newly established charitable or religious trust or institution which has commenced activities from undue hardships for reapplying immediately for regular approval after getting provisionally registered. A newly established charitable or religious trust or institution which has commenced activities will now be able to apply directly for regular approval.
This also covers a charitable or religious trust or institution which was already created or established but never took registration for income-tax exemption under the Income-tax Act and is seeking registration for the first time. As it has commenced its activities and is already carrying on its activities, these charitable or religious trusts or institutions can now directly apply for regular registration.
The amendment in Rule 17A(1)(i) with this 11th Amendment Rules of 2023 makes a reference to item (A) of sub-clause (vi) to section 12A(1)(ac) which requires a newly established charitable or religious trust or institution which has not commenced its activities at the time of filing of an application shall apply for registration in Form No. 10A and provisional registration will be granted to such trust or institution.
In the same line, an amendment is carried out in Rule 17A(1)(ii) to make a reference to item (B) of sub-clause (vi) to section 12A(1)(ac) which requires a newly established charitable or religious trust or institution which has commenced its activities at the time of filing of an application shall apply for registration in Form No. 10AB and regular registration for a period of 5 years will be granted to such trust or institution after verification.
Rule 17A(7) specifies that in case of an application for a grant of provisional registration made under sub-clause (vi) to section 12A(1)(ac) during the previous year beginning on 1st day of April 2021, the provisional registration shall be effective from the assessment year beginning on 1st day of April 2022 i.e. AY 2022-23.
Since sub-clause (vi) is amended by Finance Act, 2023 hence this sub-rule (7) is amended to state that this sub-rule (7) of Rule 17A shall apply prior to the amendment in sub-clause (vi) by the Finance Act, 2023.
The amendment in Rule 17A is prescribed in the following manner-
2. In the Income-tax Rules, 1962 (hereafter referred to as the principal rules),—
(a) …….
(b) …….
(c) in rule 17A,-
(i) in sub-rule (1),-
(I) in clause (i), for the words, brackets and figure “sub-clause (i) or”, the words, brackets, figure and letter “sub-clause (i) or item (A) of sub-clause” shall be substituted;
(II) in clause (ii), for the word, brackets and figure “or (v)”, the words, brackets, figures and letter “or (v) or item (B) of sub-clause (vi)” shall be substituted;
(ii) in sub-rule (7), for the word, figure and letter “section 12A” the words, figures and letter “section 12A as it stood immediately before its amendment vide the Finance Act, 2023,” shall be substituted.
Consequent changes in codes, notes and verification in various forms are notified which are discussed below.
Changes in Form No. 10A
No changes in the particulars of Form No. 10A are notified. However, changes in the verification/declaration portion of the Form have been prescribed.
In the verification/declaration part, the applicant has to declare that the institution, trust or fund has not commenced the activities on or before the date of making this application.
Further, the applicant has to declare that the institution, trust or fund will communicate forth with any alteration in the terms of the trust/society/nonprofit company, or in the rules governing the Institution, made at any time after furnishing the application.
Further, codes for furnishing the application under appropriate clauses of section 12A(1)(ac)/10(23C)/80G(5) are also modified to incorporate the changes in these sections.
Changes in Form No. 10AB
No changes in the particulars of Form No. 10AB are notified. However, changes in the verification/declaration portion of the Form have been prescribed.
In the verification/declaration part, the applicant has to declare that the institution, trust or fund has commenced the activities and the date of commencement of activities on or before the date of making this application.
Further, the applicant has to declare that the institution, trust or fund will communicate forth with any alteration in the terms of the trust/society/nonprofit company, or in the rules governing the Institution, made at any time after furnishing the application.
Further, codes for furnishing the application under appropriate clauses of section 12A(1)(ac)/10(23C)/80G(5) are modified and new codes are inserted to incorporate the changes in these sections.
Changes in Form No. 10AC
The existing Form No. 10AC in which the Order for granting approval or registration to a trust or institution u/s 10(23C)/12A/80G is passed does not contain the ‘nature of activities’ of the trust or institution although the same is filled in the application forms by the applicant.
Form No. 10AC is modified to insert the information related to the ‘nature of activities’ of the trust or institution whether the same is a Charitable or Religious or Religious cum charitable Trust or institution.
Changes in Form No. 10AD
Similar changes in line with Form No. 10AC are notified for Form No. 10AD. Form No. 10AD will now contain the information related to the ‘nature of activities’ of the trust or institution whether the same is a Charitable or Religious or Religious cum charitable Trust or institution.
Changes in Trust Tax Audit Report in Form No. 10B and Form No. 10BB
The 11th Amendment Rules of 2023 have also amended Form No. 10B/10BB related to tax audit reports by a trust or institution. The New Form No. 10B and Form No. 10BB are recently notified by Notification No. 7/2023 dated 21.02.2023 and notified drastic changes to these forms both in the applicability and reporting of data/information.
Rule 16CC and Rule 17B are related to the tax audit report of a trust or an institution approved are section 10(23C) and section 12A of the Act respectively.
These rules have been substituted with effect from 1st April 2023 vide Income-tax amendment (3rd Amendment) Rules, 2023 through Notification No. 7/2023 dated 21.02.2023 and as per the amended Rules, common tax audit report forms have been prescribed for trusts or institutions registered under section 12AB or approved under section 10(23C) based on specified conditions.
Prior to the amendment, Form No. 10B was prescribed for trusts or institutions registered under section 12AB, and Form No. 10BB was applicable to trusts or institutions approved under section 10(23C). However, effective from 0.1.04.2023, Form No. 10B shall be applicable for both, trusts or institutions registered under section 12AB and to trusts or institutions approved under section 10(23C) depending on certain conditions.
Similarly, Form No. 10BB would be applicable for both, trusts or institutions registered under section 12AB and trusts or institutions approved under section 10(23C) based on certain conditions.
Form No. 10BB is applicable in the following cases-
1. Where the total income of the trust ot institutions does not exceed Rs. 5 crore during the pervious year.
2. Where the trust or institution does not receive any amount of foreign contribution.
3. Where the trust or institution does not apply any amount of its income outside India in the previous year.
In other cases, Form No. 10B shall be applicable.
Any tax audit report furnished on or after 01.04.2023 shall be in the new prescribed forms.
Changes in Form No. 10B
Changes is prescribed in schedule 269ST of Form No. 10B. The schedule 269ST notified earlier contains an error as it was asking the information similar to the information required to be provided for Schedule 269T. However, the nature of transactions covered under Section 269T and Section 269ST are different. Hence, the error is rectified and schedule 269ST is modified according to the provisions.
The revised schedule 269ST in Form No. 10B requires reporting of the following-
● Name of the payer from whom cash is received in excess of Rs. 2 Lakh,
● PAN of such person
● Address of the person, and
● Amount of payment received.
This amendment shall take effect from 1st October, 2023, though these should have been made effective from 01.04.2023.
Changes in Form No. 10BB
Row No. 10 of the annexure to Form 10BB requires reporting of the commencement of activities of a provisionally registered or approved trust or institution under section 12A or section 10(23C) of the Act. In Col. 10(iii), there was a requirement to report an application for regular registration has been filed if the trust or institution has commenced activities. For this reference to sub-clause (iv) of clause (ac) of sub-section (1) of section 12A was wrongly made. Sub-clause (iv) provides for filing of application where registration of the trust or institution has become inoperative.
Application for regular registration is required to be filed under sub-clause (iii) of section 12A(1)(ac) in a case where a provisionally registered trust commences its activities or a period of three years is expiring. The reference to sub-clause (iv) is now rectified and sub-clause (iv) is substituted with sub-clause (iii) in Row 10(iii) of Form No. 10BB.
This amendment shall take effect from 1st October, 2023, though these should have been made effective from 01.04.2023.
Read the full text of CBDT Notification No. 45/2023 dated 23.06.2023 on Amendment in Rules and Forms related to Charitable Trusts/NGOs
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, 23rd June, 2023
INCOME-TAX
G.S.R. 457(E).—In exercise of the powers conferred by clauses (i), (ii), (iii) and (iv) of the first proviso to clause (23C) of section 10, ninth proviso to clause (23C) of section 10, clause (b) of the tenth proviso to clause (23C) of section 10, sub-clauses (i) (ii), (iii), (iv), (v) and (vi) of clause (ac) of sub-section (1) of section 12A, sub-clause (ii) of clause (b) of sub-section (1) of section 12A, sub-section (3) of section 12AB, clauses (i), (ii), (iii) and (iv) of the first proviso to sub-section (5) of section 80G, third proviso to sub-section (5) of section 80G read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. Short title and commencement. (1) These rules may be called the Income-tax (Eleventh Amendment) Rules, 2023.
(2) Save as otherwise provided in these rules, they shall come into force from the 1st day of October, 2023.
2. In the Income-tax Rules, 1962 (hereafter referred to as the principal rules),—
(a) in rule 2C,-
(i) in sub-rule (1), -
(I) in clause (i), for the words, brackets and figure “clause (i) or”, the words, brackets, figure and letter “clause (i) or sub-clause (A) of ” shall be substituted;
(II) in clause (ii), for the word, brackets and figures “clause (iii)”, the words, bracket, figures and letter “clause (iii) or sub-clause (B) of clause (iv)” shall be substituted;
(ii) in sub-rule (7), for the word and figures “section 10”, the words and figures “section 10 as it stood immediately before its amendment by the Finance Act, 2023,” shall be substituted;
(b) in rule 11AA,-
(i) in sub-rule (1),-
(I) in clause (a), for the words, brackets and figure “clause (i) or”, the words, brackets, figure and letter “clause (i) or sub-clause (A) of” shall be substituted;
(II) for clause (b), the following sub-clause shall be substituted, namely:- “(b) Form No. 10AB in case of application under clause (ii) or clause (iii) or sub-clause (B) of clause (iv) of the first proviso to sub - section (5) of section 80G to the Principal Commissioner or Commissioner authorised under the said proviso.” ;
(ii) for sub-rule (7), the following sub-rule shall be substituted, namely:-
“(7) In case of an application made under,-
(i) clause (iv) of the first proviso to sub-section (5) of section 80G as it stood immediately before its amendment vide the Finance Act, 2023,; or
(ii) sub-clause (A) of clause (iv) of first proviso to sub-section (5) of section 80G,
the provisional approval shall be effective from the assessment year relevant to the previous year in which such application is made.”;
(c) in rule 17A,-
(i) in sub-rule (1),-
(I) in clause (i), for the words, brackets and figure “sub-clause (i) or”, the words, brackets, figure and letter “sub-clause (i) or item (A) of sub-clause” shall be substituted;
(II) in clause (ii), for the word, brackets and figure “or (v)”, the words, brackets, figures and letter “or (v) or item (B) of sub-clause (vi)” shall be substituted;
(ii) in sub-rule (7), for the word, figure and letter “section 12A” the words, figures and letter “section 12A as it stood immediately before its amendment vide the Finance Act, 2023,” shall be substituted.
….
….
[Notification No. 45/2023/ F. No. 370142/18/2023-TPL]
SOURABH JAIN, Under Secy.
Note : The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969 (E) dated 26th March, 1962 and were last amended vide notification number G.S.R 194(E) dated 16th March, 2021.
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