Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Assessment of Charitable Trusts and Institutions

Assessment of Charitable Trusts and Institutions
Assessment of Charitable Trusts and Institutions

Table of Contents

1.   Exemption Under Section 11 to 13 in case of Public Trusts for Charitable or Religious Purposes

The income derived from a property held under charitable or religious trusts is exempt from tax under section 11 subject to the fulfillment of certain conditions. However, any profit or gain of a business carried on by such trust shall not be exempt unless the business is incidental to the attainment of the objectives of the trust/institution and separate books of account are maintained by such trust! institutions in respect of such business.

The word Trust as used in the context of sections 11 to 13 of the Income-tax Act, includes in addition to the trust “any other legal obligation”.

(1).  Conditions to be satisfied for claiming exemption under section 11 in case of Public Trusts :

Subject to the provisions of sections 60 to 63, certain incomes of a charitable? religious trust or institution are not included in its total income to the extent and subject to the conditions specified in the Act.

For claiming exemption under section 11, the following conditions must be satisfied:

(a)        Trust must have been created for any lawful purpose;

(b)        Such trust/institution must be for charitable or religious purposes.

According to section 2(15), charitable purpose includes relief of the poor, education, yoga, medical relief, preservation of environment (including water sheds forests and wild life) and preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility.

Trust / institution covered under advancement of any other object of general public utility can do commercial activities up to 20% of its total receipts

The advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless. —

(i)         such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

(ii)        the aggregate receipts from such activity or activities, during the previous year, do not exceed 20% of the total receipts, of the trust or institution undertaking such activity or activities, for the previous year.

(c)        The Property from which income is derived should be held under trust by such charitable or religious trust/institution.

(d)        The accounts of the trust/institution should be audited for such accounting year in which the total income, before giving effect to provisions of section 11 or 12, exceeds the maximum amount which is not chargeable to lax and the person in receipt of the income should obtain an audit report in Form No. 10B [Rule 17B] and furnish the same along with the return of income.

(e)        The trust must get itself registered with the Commissioner of Income-tax within the
prescribed time.

(f)         Where the “property held under a trust” includes a business undertaking, the provisions of sections 11(4) shall be applicable.

On the other hand, if the trust wishes to carry on business, the profits or gains earned from such business shall not be exempt under section 11, unless the business is incidental to the attainment of the objectives of the trust/institution and separate books of account are maintained by such trust and institution in respect of such business.

(g)        The charitable trust created on or after 1.4.1962 should satisfy the following further conditions:

(i)         it should not be created for the benefit of any particular religious community or caste;

(ii)        no part of the income of such charitable trust or institutions should ensure directly or indirectly for the benefit of the settlor or other specified persons: and

(iii)       the property should be held wholly for charitable purposes.

(h)        The funds of the trust should be invested or deposited in the permissible forms and modes prescribed in section 11(5).

(2).  Exempted Incomes U/s 11 in case of Public Trusts

Subject to the provisions of sections 60 to 63, the following incomes of a religious or charitable trust or institution are not included in its total income, provided the conditions mentioned above in para-1 are satisfied:

(a) [Section 11(1)(a)]- Income from property held under trust wholly for charitable or religious purposes:

Income derived from property held under trust, wholly for charitable and religious purposes. shall be exempt—

(i)         to the extent such income is applied in India for such purposes; and

(ii)        where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of 15% of the income from such property.

(b) [Section 11(1)(b)]- Income from property held under trust which is applied in part only for charitable or religious purposes:

Income derived from property held under Trust in part only for such purpose, shall be exempt:

(i)         to the extent such income is applied in India for such purposes, provided, the trust in question is created before the commencement of Income-tax Act, 1961 i.e., before 1.4.1962; and

(ii)        where any such income is finally set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of 15% of the income from such property.

(c) [Section 11(1)(c)]- Income from property held under trust which is applied for charitable purposes outside India:

(i)         Income derived from property held under trust, created on or after
1.4.1952 for charitable purpose which tends to promote international welfare in which India is interested, shall be exempt to the extent to which such income is applied to such purpose outside India. Religious trusts are not covered here.

(ii)        Income derived from property held under a trust for charitable or religious purposes, created before 1.4.1952, shall be exempt to the extent to which such income is applied to such purposes outside India.

In the above two cases, it is necessary that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income.

(d) [Section 11(1)(d)]- Voluntary Contributions forming part of Corpus:

Income in the form of voluntary contributions made with a specific direction. that they shall form part of the corpus of the trust or institution, shall be fully exempt. The condition that at least 85% of the income should be applied during the previous year in which it is earned is not applicable in this case.

‘Where Assessee received corpus donation on which it earned interest, in view of specific direction of donors that said interest would also form part of corpus, Assessee’ s claim for exemption under section 11 in respect of interest so earned was to be allowed.

It is not sufficient that the property is indirectly responsible for the income; it is necessary that the income must directly and substantially arise from the property held under trust. The property must be the effective source from which the income arises.

(3).  Summarised Table of Exempt income in case of Charitable or Religious Trust

SL. Nature of income
NO.
To what extent
exemption
allowed
conditions
applicable
Relevant
provisions
Remarks
if any
(a) Income derived from property held under trust wholly for charitable or religious purposes To the extent such income is applied in India for such
purposes
Accumulation allowed up to 15% of such income
Accumulation in excess of 15% allowed subject to certain conditions being satisfied
Section 11(1)(a)

 

Section
11(2)

Accumulation treated as applied for such purposes

—-do—

(b) Income derived from property held under trust which is applied in part only for charitable or religious purposes —do—— (i) —do——

(ii) Trust should have been created before 1.4.1962

Section 11(1)(b) —do—
(c) Income derived from property held under trust—

(i) Created on or after 1.4.1952 for charitable purposes to be used for charitable purposes
outside India (Religious trust not covered)

To the extent such income is applied to such purposes outside India The purpose of the trust is to promote
international welfare in which India is interested. Further General or special order of Board for exemption is necessary
No accumulation allowed
Section 11(1)(c)(i) Accumulation not exempt
(ii) Created before 1.4. 1952 for charitable or religious purpose to be used for such purposes outside India To the extent such income is applied outside India for such purposes No condition applicable but General or special order of Board for exemption is necessary Section 11(1)(c)(ii) Accumulation not exempt
(d) Voluntary contribution forming part of corpus 100% exempt with no condition of application or accumulation There should be specific direction that such contribution to from part of corpus of the trust or institution Section 11(1)(d)

2.   Accumulation of Income in excess of 15% of the income earned [Section 11(2) and Rule 17] by Public Trusts

As already mentioned, Assessee is allowed to accumulate upto 15% of the income earned during the year for application for charitable or religious purposes in India in future. If the Assessee wants to accumulate or set apart the income in addition to 15% of the income, he can do so if certain conditions are satisfied. In this case, the amount accumulated in excess of 15% shall be deemed to have been applied for charitable or religious purposes in India during the previous year itself.

(1).  Conditions to be satisfied for allowing Exemption U/s 11(2) by the Public Trusts.

Exemption under section 11(2) shall be allowed subject to the following conditions being satisfied:

(a)        Such person furnishes a statement in Form No. 10 electronically either under digital signature or electronic verification code to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed 5 years;

(b)        The money so accumulated or set apart is invested or deposited in the forms or modes specified in Section 11(5);

(c)        The statement referred to in clause (a) is furnished on or before the due date specified under section 139(1) for furnishing the return of income for the previous year.

Provided that in computing the period of 5 years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded.

(2).  [Section 13(9)]- Exemption under section 11(2) not be allowed unless the return of income of the trust is furnished before the due date of filing the return specified under section 139(1)

Nothing contained in section 11(2) shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if—

(i)         The statement referred to in clause (a) of section 11(2) (mentioned above) in respect of such income is not furnished on or before the due date specified under section 139(1) for furnishing the return of income for the previous year: or

(ii)        The Return of Income for the previous year is not furnished by such person on or before the due date specified under section 139(I) for furnishing the return of income for the said previous year.

In other words, benefit of accumulation shall not be allowed under section 11(2) unless the said statement in prescribed form as well as the return of income are furnished before the due date of filing the return of income specified under section 139(1).

(3).  [Section 11(3)]- Consequences if such Accumulated Income in Excess of 15% is Not Applied / Invested in the Prescribed Manner by the Trusts:

Where the income of the trust referred to in Section 11(2)—

(a) is applied for purposes other than charitable or religious purposes, or ceases to be accumulated or set apart for application thereto, or It shall be deemed to be income of the previous year in which it is so applied for other purpose or ceases to be accumulated or set apart.
(b) ceases to remain invested or deposited in any mode mentioned under section 11(5) above, or It shall be deemed to be income of the previous year in which it ceases to remain so invested or deposited.
(c) is not utilized for the purpose for which it is so accumulated or set apart during the period specified (not exceeding 5 years) or in the year immediately following thereof, or It shall be deemed to be income of the previous year immediately following the expiry of period specified therein.
(d) is credited or paid to any trust or institution registered under section 12AA or any institution or trust referred to in Section 10(23)(iv), (v), (vi), or (via) It shall be deemed to be income of the previous year in which it is paid or credited.

 

Note:

However, in computing the aforesaid period of 5 years, the period during which the income could not be applied for the purposes for which it is so accumulated or set apart due to an order or injunction of any Court, shall be excluded.

(4).  [Section 11(3A)]- Circumstances where the Accumulated Income in excess of 15% can be utilized by the Trusts for a purpose other than that for which it was accumulated:

Where the income invested/deposited in approved modes cannot be applied for the purposes for which it was accumulated or set apart, due to circumstances beyond the control of the Assessee, such Assessee can make an application to the Assessing Officer specifying such other purpose for which he wants to utilize such accumulated income.

Such other purposes should also be in conformity to the objects of the trust. The Assessing Officer in this case, may allow the application of such income to such other purposes. On such an application being allowed by the Assessing Officer, the funds may be accumulated and/or applied for the purposes newly specified and the provisions regarding withdrawal of exemption will be applicable on the basis that new purposes were the ones that had been specified in the notice for accumulation given under section 11(2).

However, the Assessing Officer shall not allow application of such income by way of payment or credit made for donation to other trust or other institutions, but the Assessing Officer may allow application of such accumulated income for the purpose of donation to other trust or institution in the year in which such trust or institution was dissolved.

3.   Points for Consideration towards Assessment of Public Trusts for Charitable and Religious Purpose

(1).  Voluntary Contribution Received by the Trust:

Voluntary contribution can be of two types:

(a)    Voluntary contribution with a specified direction that they shall form part of the corpus of the trust or institution (Corpus Donations):

Such voluntary contributions received by the trust are fully exempt under section 11(1)(d) and the condition that at least 85% of the income should be applied during the previous year in which it is earned is not applicable in this case.

(b) Voluntary contributions not being contributions made with a specific direction that they shall form part of the corpus of the Trust / Institution:

Such contributions are covered under section 12 and shall be deemed to be income derived from property held under trust wholly for charitable or religious purposes. Exemption of such contribution shall be allowed in the same manner as is allowed for income derived from property held under trust in section 11 and all the conditions including 85% of income to be applied in the same previous year as given above are applicable in this case.

(2).  [Section 115BBC]- Taxation of certain Anonymous Donations Received by the Trust

(a)    [Section 115BBC (1)]- Entities liable to pay tax on Anonymous Donations

Any income received by way of anonymous donations by the following entities shall be
included in the total income and taxed at the rate of 30%.

(i)         any trust or institution referred to in section 11;

(ii)        any university or other educational institution referred to in section 10(23C) (iiiad) and

(vi)       i.e., its annual receipts are less than or more than Rs. 1 crore;

(iii)       any hospital or other institution referred to in section 10(23) (iiiae) and (via) i.e., its annual receipts are less than or more than Rs. 1 crore;

(iv)       any fund or institution referred to in section 10(23C) (iv);

(v)        any trust or institution referred to in section 10(23C) (v);

(b)    [Section 115BBC (2)]- Entities not liable to Pay Tax on Anonymous Donations

The following entities shall not be liable to pay tax on anonymous donations received by
them.

(i)         any trust or institution created or established wholly for religious purposes;

(ii)        any trust or institution created or established for both religious as well as charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution.

(c)     Tax on the total income of the trust which include anonymous donation also

Where the total income of a trust or an institution referred to in section 115BBC (1) includes an income by way of any anonymous donations, the income tax payable shall be the aggregate of—

(i)         the amount of income-tax calculated at the rate of 30% on the aggregate of anonymous donations received in excess of the higher of the following, namely:

(A)       5% of the total donations received by the Assessee; or

(B)        Rs. 1,00,000

and

(ii)        the amount of income-tax with which the Assessee would have been chargeable had his total income been reduced by the aggregate of anonymous donations received in excess of the amount referred to in sub-clause (A) or sub-clause (B) of clause (i) above, as the case may be.

Therefore, if such amount of donation which is not treated as anonymous donation is not applied like any other income, it will become taxable.

(3) [Section 12(2)]- Exemption U/s 11(1) not to be allowed if benefit of medical or educational services is made available to any person referred to in section 13(3):

Notwithstanding the exemption available under section 11(1), if the charitable or religious trust is running a hospital or medical institution or an educational institution and makes available medical or educational services to any person referred to in section 13(3), the value of such services shall be deemed to be income of such trust and chargeable to income tax.

(4) Treatment of Capital Gains in case of Charitable Trusts:

Any profit or gain arising from the transfer of capital asset being property held under trust shall be treated as capital gain. Since such capital gain, whether short-term or long-term, is also part of the income as per section 2(24)(vi), to claim exemption under Section 11 the Charitable Trust should also apply income from such capital gain for charitable purposes during the previous year like any other income. It means that trust shall have to apply at least 85% of the income from such capital gain for charitable purposes during the previous year subject to exception given under section 11(2).

[Section 11(1A)]- Cases where income from capital gain shall be deemed to have been applied for charitable purposes

Section 11(1A) deals with two situations namely:

(A)     [Section 11(1A) (a)]- Transfer of capital Asset held under trust wholly for charitable or religious purposes:

Where any capital asset being property held under trust wholly for charitable or religious purposes is transferred, the treatment of Capital Gains shall be as under:

Amount of net consideration utilized Amount deemed to be applied
(i) Where the whole of the net consideration of such asset is utilized in acquiring a new capital asset the whole of the capital gain.
(ii) Where only a part of the net consideration is utilized for acquiring the new capital asset so much of such capital gain as is equal to the amount, if any, by which the amount so utilized exceeds the cost of the transferred asset i.e., amount invested minus cost of the transferred asset.
(B)     [Section 11(1A) (b)]- Transfer of capital asset held under trust in part only for charitable or religious purposes:

Where capital assets being a property held under trust in part only for such purposes is transferred, the treatment of capital gains shall be as under:

Amount of net consideration utilized Amount deemed to be applied
(i) where the whole of the net consideration is utilized in acquiring the new capital asset the appropriate fraction of the capital gain arising from the transfer of the capital asset
(ii) in any other case the exemption shall be limited to so much of the appropriate fraction of the capital gain as is equal to the amount, if any, by which the appropriate fraction of the amount utilized for acquiring the new capital assets, exceeds the appropriate fraction of the cost of the transferred asset.

(5).  Treatment of ‘Donation in Kind’ Received by the Trusts:

Certain funds, trusts and institutions running hospitals, creches orphanages, school, etc., often receive donation in kind from various sources for application towards their charitable purposes. These contributions may be in the shape of books, clothes for the poor, grains to feed the poor, drugs, hospital equipment’s, etc.

Since the donation in kind, of a nature referred to above, received by a fund, trust or institution would be income within the meaning of section 2(24) (vi) of the Act, it is clarified that the use of these towards object for which the fund, trust or institutions is established would be regarded as application of the income of the fund, trust or institution.

Where a trust received donation in kind and the same could not be used towards objects for which the trust, fund, etc. is established, it should convert the asset in the form or mode specified in section 11(5) before the expiry of 1 year from the end of the previous year in which asset is acquired.

(6).  Treatment of Business Income of a Trust

Trust can earn the following two types of business income: —

(a)    [Section 11(4)]- Profits and gains from a business undertaking held under a Trust:

According to section 11(4), for the purpose of section 11 “property held under trust” includes a business undertaking so held and where a claim is made that the income of any such undertaking shall not be included in the total income of the trust, etc. in receipt thereof, the Assessing Officer shall have the power to determine the income of such undertaking in accordance with the provision of the Income- Tax Act relating to the assessment and where the income determined by the Assessing Officer exceeds the income as shown in the books of account of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes and hence would not be exempt.

(b)    [Section 11(4A)]- Profits and Gains from incidental business:

Where a trust or an institution is also carrying on any business activity, the provisions of sections 11(1), (2), (3) and (3A) regarding exemption etc. shall not apply in respect of income earned from such business activity.

However, if such business is incidental to the attainment of the objects of the trust / institution and separate books of account are maintained by such trust / institution in respect of such business, the exemption shall be available to trust in respect of income earned from such business activity.

4.   Modes of Deposit / Investment available to Public Trusts as per Section 11(5)

Section 11(5) specifies the following modes of Deposit / investment:

(1)        Investment in Government Saving Certificates and any other Securities or Certificates issued by the Central Government under its Small Saving Scheme.

(2)        Deposits with Post Office Savings Banks.

(3)        Deposits with Scheduled Banks or Co-operative Banks (including a Cooperative Land Mortgage Bank or a Cooperative Land Development Bank).

(4)        Investments in the units of Unit Trust of India.

(5)        Investments in Central or State Government Securities.

(6)        Investments in debentures issued by or on behalf of any company or corporation.

However, both the principal and interest thereon must have been guaranteed by the Central or the State Government.

(7)        Investment or deposits in any public sector company.

(8)        Investment in bonds of approved financial corporation providing long term finance for industrial development

(9)        Investment in bonds of approved public companies whose principal object is to provide long- term finance for construction or purchase of houses in India for residential purposes.

(10)      Investment in immovable property excluding plant and machinery, not being plant and machinery installed in a building for the convenient occupation thereof.

(11)      Deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for urban infrastructure in India.

Explanation. —For the purposes of this clause, —

(a)        long-term finance means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than 5 years;

(b)        public company shall have the meaning assigned to it in section 3 of the Companies Act, 1956;

(c)        urban infrastructure means a project for providing potable water supply, sanitation and sewerage, drainage, solid waste management, roads, bridges and flyovers or urban transport.

(12)      Deposits with the Industrial Development Bank of India.

(13)       Any other form or mode of investment or deposit as may be prescribed.

5.   Conditions for Applicability of Sections 11 and 12 in case of Public Trusts for Charitable and Religious purposes.

The provisions of section 11 and 12 shall not apply in relation to the income of any trust or institutions unless the following conditions are fulfilled:

(1) [Sections 12A (1)]- Registration of Trust

As already discussed, for claiming exemption under sections 11 and 12, the trust must be registered under the Income-tax Act.

(a)        Where a trust or institution has been granted registration under section 12AA, the benefit of sections 11 and 12 shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. [First proviso to Section 12A (2)]

(b)        No action for reopening of an assessment under section 147 shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year. [Second Proviso to Section 12A (2)]

(c)        The above benefits contained in the above first and second provisos, however, would not be available in case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA or a registration once granted was cancelled. [Third proviso to section 12A (2)]

(2) [Section 12A (1) (ab)]- Fresh Application for Registration required if there is change or modification of objects of entities Exempt U/s 11 and 12

The existing provisions of section 12A of the Act provide for conditions for applicability of sections 11 and 12 in relation to the benefit of exemption in respect of income of any trust or institution.

Further, the provisions of Section 12AA of the Act provide for registration of the trust or institution which entitles them to the benefit of sections 11 and 12. It also provides the circumstances under which registration can be cancelled, one such circumstance being satisfaction of the Principal Commissioner or Commissioner that its activities are not genuine or are not being carried out in accordance with its objects subsequent to grant of registration.

However, at present there is no explicit provision in the Act which mandates said trust or institution to approach for fresh registration in the event of adoption or undertaking modifications of the objects after the registration has been granted.

Therefore, for claiming exemption under sections 11 and 12, the Act has inserted sub-clause (ab) as another condition for claiming exemption under section 12A (1).

Sub-clause (ab) provides that where a trust or an institution has been granted registration under 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, subsequently. it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, it shall be required to obtain fresh registration by making an application within a period of thirty days from the date of such adoption or modifications of the objects in the prescribed form and manner.

In view of the above, the consequential amendments have been made under section 12AA relating to procedure for registration.

Documents to be attached along with application in Form 10 [Rule 17A]:

Application for registration in Form IOA shall be made in duplicate and shall be accompanied by the following documents, namely: —

(a) (i)   where the trust is created, or the institution is established, under an instrument the instrument in original, together with one copy thereof
(ii)   where the trust is created, or the institution is established, otherwise than under an instrument the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof

However, if the instrument or document in original cannot conveniently be produced, it
shall be open to the Chief Commissioner or Commissioner to accept a certified copy in lieu
of the original;

(b)        Where the trust or institution has been in existence during any year or years, prior to the financial year in which the application for registration is made, two copies of the accounts of the trust or institution relating to such prior year or years (not being more than 3 years immediately preceding the year in which the said application is made) for which such accounts have been made up.

(3) [Section 12A(1)(b)]- Accounts of the Trust must be Audited by the Chartered Accountant

Where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year. the accounts of the trust or institution for that year should have been audited by a Chartered Accountant and the person in receipt of the income should furnish along with the return of income for the relevant assessment year the report of such audit in Form No. 10B duly signed and verified by such accountant and selling forth such particulars as may be prescribed.

(4) [Section 12A (1) (ba)]- Return of income to be furnished before the due date specified in section 139(1)

The person in receipt of the income should furnish the return of income for the previous year in accordance with the provisions of section 139(4A), within the time allowed under that section i.e., section 139(1). If the return is not furnished within the time allowed under section 139(l), the exemption under section 11 and section 12 shall not be allowed to the Assessee.

6.   Procedure for Registration of a Trust or Institution made under Section 12AA

(1) [Section 12AA (1)]- Steps to be taken by the Principal Commissioner or Commissioner

The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under section 12A (1) (aa) or (ab), shall—

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

(i)         the genuineness of activities of the trust or institution and

(ii)        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 may also make such inquiries as he may deem necessary in this behalf; and

(b)        after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he—

(i)         shall pass an order in writing registering the trust or institution:

(ii)        shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,

and a copy of such order shall be sent to the applicant:

However, no order refusing to register the trust shall be passed unless the applicant has been given a reasonable opportunity of being heard.

(2) [Section 12AA (2)]- Order granting or refusing registration should be passed within 6 months

Every order granting or refusing registration shall be passed before the expiry of 6 months
from the end of the month in which the application was received under section 12A (1) (aa) or (ab).

(3) [Section 12AA (3) & (4)]- Commissioner empowered to Cancel Registration of Charitable and Religious Trusts U/s 12AA

Where a trust or an institution has been granted registration under section 12AA(1)(b) or has obtained registration at any time under section 12A as it stood before the amendment by the Finance (No. 2) Act, 1996, the Principal Commissioner or the Commissioner of Income-tax can cancel the registration under the following two sub-sections:

(1)        Sub-section (3) of Section 12AA if certain conditions mentioned therein are satisfied.

(2)        Sub-section (4) of section 12AA if benefit of exemption under Sections 11 and 12 is not available due to the operation of section 13(1).

(1)    Cancellation of Registration under Section 12AA (3)

As per section I2AA, the registration once granted to a trust or institution shall remain in force till it is cancelled by the Principal Commissioner or Commissioner.

Consequently, the Principal Commissioner or Commissioner can after giving reasonable opportunity of being heard to the concerned trust or institution, pass an order under section 12AA (3) in writing cancelling the registration under the following two circumstances:

(a)        the activities of a trust or institution are not genuine, or;

(b)        the activities are not being carried out in accordance with the objects of the trust or institution.

Only if either or both the above conditions are met, would the Principal Commissioner/ Commissioner be empowered to cancel the registration, and not otherwise.

However, no order under section 12AA (3) shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.

(2)    Cancellation of Registration under Section 12AA (4)

The powers of Principal Commissioner / Commissioner to cancel registration under Section 12AA (3) are severely restricted. There have been cases where trusts, particularly in the year in which they have substantial income claimed to be exempt under other provisions of the Income Tax Act, deliberately violate provisions of Section 13 by investing in prohibited mode etc. Similarly, there have been cases where the income is not properly applied for charitable purposes or has been diverted for benefit of certain interested persons. Due to restrictive interpretation of the powers of the Principal Commissioner / Commissioner under Section 12AA, registration of such trusts or institutions continues to be in force and these institutions continue to enjoy the beneficial regime of exemption.

Whereas under section 10(23C), which also allows similar benefits of exemption to a fund, Institution, University etc. the power of withdrawal of approval is vested with the prescribed authority if such authority is satisfied that such entity has not applied income or made investment in accordance with provisions of section 10(23C) or the activities of such entity are not genuine or are not being carried out in accordance with all or any of the conditions subject to which it was approved.

Therefore, in order to rationalize the provisions relating to cancellation of registration of a trust, section 12AA (4) was inserted which provides as under:

Where a trust or an institution has been granted registration, and subsequently it is noticed that—

(a)        the activities are being carried out in such a manner that, —

(i)         its income does not ensure for the benefit of general public:

(ii)        it is for benefit of any particular religious community or caste (in case it is established after commencement of the Income-tax Act);

(iii)       any income or property of the trust is applied for benefit of specified persons like author of trust, trustees, etc.; or

(iv)       its funds are invested in prohibited modes,

then the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution.

7.   [Section 13]- Exemption of Income U/s 11 in case of Charitable or Religious Trust / Institution does not Apply in certain Cases

The following incomes of charitable or religious trusts/institutions shall not be eligible for exemption under sections 11 and 12.

(1)        Any Part of the income from the property held under a trust for private religious purposes which does not ensure for the benefit of the public [Section 13(1)(a)].

Section 13(1)(a) shall not be applicable if the element of public benefit has been satisfied. It does not matter where the control lies, if the benefit accrues to public at large but the control is with specific group of persons, then section 13(1)(a) will not be attracted.

(2)        Any income of trust / institution created / established for charitable purposes on or after 1.4.1962,

if such trust or institution is created or established for the benefit of any particular religious community or caste [Section 13(1)(b)]. The exemption is however, available to a charitable trust or institution created or established before 1.4.1962 even if it is for the benefit of any particular religious community or caste.

Where Assessee-trust had established institution for benefit of all sections of society and religious activities carried out by it were minuscule in comparison to its main activity, Commissioner could not cancel registration of trust on ground of violation of provisions of section 13(1)(b).

(3)        Any income of Charitable or Religious Trust or institution created or established after 1.4. 1962,

if under the terms of the trust or rules governing the institution, any part of the income ensures directly or indirectly for the benefit of any person referred to in sub-section 13(3) [Section 13(1)(c)].

(4)        Any income of a trust for charitable or religious purposes or a charitable or religious institution (whenever created or established) if any part of such income or any property of the trust or the institution during the previous year is used or applied directly or indirectly for the benefit of any person referred to in Section 13(3) [Section 13(1)(c)].

However, exemption is not denied where the trust, etc. is created before 1.4.1962 and such use or application of income is in compliance with a mandatory term of the trust or a mandatory rule governing the institution.

Charitable Trusts not to lose exemption if educational or medical facilities provided to specified persons [Section 13(6)]:

 A trust running an educational institution or a medical institution or a hospital shall not lose the benefit of exemption of any income under section 11 other than the value of benefits of educational or medical facilities provided to the specified persons referred to in section 13(3), solely on the ground that such benefits have been provided to such persons.

However, the value of such facilities provided to such specified persons either free of cost or at concessional rate shall be deemed to be income of such trust and shall not be eligible for exemption under section 11.

The expression “value” shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to any person.

(5)        Any income of a trust / institution, if its funds are invested / deposited otherwise than as specified under section 11(5) [Section 13(1)(d)].

However, the provisions of section 13(1)(d) shall not apply to the under mentioned:

(i)         any asset forming part of the corpus of the trust as on 1.6.1973;

(ii)        any accretion to the corpus shares by way of bonus shares allotted to the trust;

(iii)       debentures issued by or on behalf of any company or corporation and acquired by the trust before March 1, 1983;

(iv)       any asset not covered under section 11(5) where such asset is held for not more than I year from the end of the previous year in which such asset is acquired;

(v)        any fund representing the profits and gains of business, being profits and gains of any previous year relevant to the assessment year 1984-85 or any subsequent assessment year. But such relaxation of the restriction will be denied unless the trust keeps separate accounts for the business. As already noted, subject to certain exceptions, such business profits no longer enjoy exemption under section 11.

8.   [Section 13(2)]- When an Income or Property of a Trust or Institution is deemed to have been used or applied for the benefit of a Person referred to in Section 13(3)

The income or the property of the trust or institution or any part of such income or property is to be deemed to have been used or applied for the benefit of a person referred to in section 13(3) in the following cases:

(1) [Section 13(2)(a)]- Interest free loan or loan without security:

If any part of the income or the property of the Trust or institution is or continues to be lent to any person referred to in Section 13(3) for any period during the previous year without either adequate security or adequate interest or both. [Section 13(2)(a)]

(2) [Section 13(2)(b)]- Use of properties without charging adequate rent:

If any land, building or other property of the trust or institution is or continues to be. made available, for the use of any person referred to in section 13(3) for any period during the previous year without charging adequate rent or other compensation. [Section 13(2)(b)]

Letting out of Trust Property to an interested person is violation of section 13(2):

Where the trust property is let out to a partnership in which the trustee was a partner for a meagre rent, there is clear violation of the requirements of section 13(2Kb), so that the trust has to lose its exemption.

(3) [Section 13(2)(c)]- Excessive payment for services:

If any amount is paid out of the resources of the trust or institution to any of the persons referred to in section 13(3) for services rendered to the trust or institution but such amount is in excess of a reasonable sum payable for such services. [Section 13(2)(c)]

(4) [Section 13(2)(d)]- Services of trust without adequate remuneration:

If the services of the trust or institution are made available to any person referred to Section 13(3) without adequate remuneration or other compensation. [Section 13(2)(d)]

(5) [Section 13(2)(e)]- Purchase of proper for trust for excessive consideration:

If any share, security or other property is purchased by or on behalf of the trust or institution from any person referred to in section 13(3) during the previous year for a consideration which is more than adequate. [Section l3(2)(e)]

(6) [Section 13(2)(f)]- Sale of trust property for inadequate consideration:

 If any share, security or other property is sold by or on behalf of the trust or institution to any person referred to in section 13(3) during the previous year for a consideration which is less than adequate. [Section 13(2)(f)]

(7) [Section 13(2)(g)]- Diversion of income or property exceeding Rs. 1,000.

 If any income or property of the trust or institution is diverted during the previous year in favour of any person referred to in section 13(3) provided the aggregate value of such income and property diverted exceeds Rs. 1,000 [Section 13(2)(g)]

(8) [Section 13(2)(h)]- Investment in substantial interest concerns:

If any funds of the trust or institution are or continue to remain, invested for any period during the previous year (not being a period before the 1 .6.1971 in any concern in which any person referred to in section 13(3) has a substantial interest. [Section 13(2)(h)]

However, section 13(4) provides that where the aggregate of the funds invested in the said concern does not exceed 5% of the capital of that concern, the exemption under section 11 will be denied only in relation to such income as arises out of the said investment.

9.   Income of certain Funds of National Importance, Educational Institutions and Medical Institutions is Exempt from Tax [Section 10(23C) and Rule 2C and 2CA]

Any income received by any person on behalf of the following is exempt from tax:

1.   Prime Minister’s National Relief Fund or the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND)

2.   The Prime Minister’s Fund (Promotion of Folk Art); or

3.   The Prime Minister’s Aid to Students Fund; or

4.   The National Foundation for Communal Harmony; or

5.   The Swachh Bharat Kosh, set up by the Central Government or

6.   The Clean Ganga Fund, set up by the Central Government: or

7.   The Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any State or Union territory

8.   Any university or other educational institution existing solely by for educational purposes and not for purpose of profit and which is wholly or substantially finance by the Government; or

9.   Any hospital or other institution for the reception and treatment of persons

(i)         suffering from illness or

(ii)        mental defectiveness or

(iii)       during convalescence or

(iv)       requiring medical attention or rehabilitation, existing solely for philanthropic purpose and not for purpose of profit and which is wholly or substantially financed by the Government; or

10.   Any university or other education institution existing, solely for educational purposes and not for purpose of profit if the aggregate annual receipts of such university or education institution do not exceed 1,00,00,000 (Rs. 1 Crore) [Sub-clause (iiiad)]; or

11.   Any hospital or other medical institution for the purpose mentioned in clause (h) above where aggregate annual receipts do not exceed Rs. 1,00,00,000 (Rs. 1 Crore) [Sub-clause (iiiac)]; or

12.   Any other fund or institution established for charitable purposes which may be approved by the prescribed authority having regards to its object and its importance throughout India or throughout any State or States [Sub-clause (iv)]; or

13.   Any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes which may be approved by the prescribed authority having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto his properly applied for the objects thereof [Sub-clause (v)]; or

14.   Any university or other educational institution existing solely for educational purposes and not for purpose of profit other than those mentioned in clause (7) and (9) above i.e., whose aggregate annual gross receipts exceed Rs. 1,00,00.000 [Sub-clause (vi)]; or

15.   Any hospital or other institution for the purpose mentioned in clause (8) above but other than those mentioned in clause (8) and (10) above i.e., whose aggregate annual receipts exceed Rs. 1,00,00,000 (Rs. 1 Crore) [Sub-clause (via)]

(1).          Conditions for Claiming Exemption

University or Educational Institution or Hospital or Medical Institution who are substantially financed by the Government [Section 10(23C) (iiiab) and (iiiac) University or Educational Institution or Hospital or Medical Institution whose aggregate annual gross receipts do not exceed Rs.1 Crore [Section 10(23C) (iiiad) & (iiiae) University or Educational Institution or Hospital or Medical Institution whose aggregate annual gross receipts exceed Rs.1 Crore [Section 10(23C) (vi) or (via) Charitable or Religious Institution covered under Section 10(23C) (iv) or (v)
1. Whether application for grant for exemption necessary No No Yes, approval is necessary Yes, approval is required
2. Form in which
application is to be made and to whom it should be made
NA NA Form No. 56 (56D upto 4.9.2019) lobe furnished electronically to the jurisdictional Principal Commissioner /
Commissioner of Income Tax (Exemption)
Form No. 56 to be furnished electronically to the jurisdictional Principal Commissioner /
Commissioner of Income Tax (Exemption)
3. Time period within which application is to be made NA NA If application is made on or after 1.4.2009, it shall be made on or before 30th September of the relevant assessment year from which exemption is sought.
Prior to this it was required to be made before the end of the relevant assessment year.
If application is made on or after 1.4.2009, it shall be made on or before 30th September of the relevant assessment year from which exemption is sought.
Prior to this it was required to be made before the end of the relevant assessment year.
4. Period of the validity of exemption NA NA If application has been made on or after 13.7.2006, it is a permanent exemption unless withdrawn. However, if application has been made before 13.7.2006, the exemption will for a period of 3 years and fresh application shall have to be made after the expiry of un-expired period of 3 years which shall also be permanent exemption unless withdrawn If application has been made on or after 13.7.2006. ii is a permanent exemption unless withdrawn. However, if
application has he been made before 13.7.2006, the exemption will be for a period
of 3 years and fresh application shall have to be made after the expiry of un expired period of 3 years which shall also be permanent exemption unless withdrawn
5. Time period within which exemption has to be granted or rejected NA NA If application is made on or after 13.7.2006, its approval is to be granted or rejected within a period of 12 months from the end of the month in which application was received by the authorities. If application is made on or after 13.7.2006. its approval is to be granted or rejected with in a period of 12 months from the end of the month in which application was received by the Authorities.
6.  Whether Audit of Accounts is Compulsory No No Yes Yes
7. Whether it is mandatory to file return of income No Yes Yes Yes

(2).          Additional Conditions for Claiming Exemption

The fund, trust or institution covered under section 10(23)(iv), (v), (vi) and (via) should satisfy the following additional conditions to claim exemption under this section:

(1)        At the time of making application in Form No. 56 or 56D, it should furnish such documents (including audited annual accounts) or information which the Central Government or the prescribed authority as the case may be, may consider necessary in order to satisfy itself about the genuineness of the activities of the fund or trust or institution / university / hospital, etc. and the Central Government or the prescribed authority, as the case may be, may also make such enquiries as it deems necessary in this behalf.

(2) (a)   it should apply its income, or accumulate it for application, wholly and exclusively to the objects for which it is established and, in a case, where more than 15% of its income is accumulated, the period of the accumulation of the amount exceeding 15% of its income shall in no case exceed 5 years; and

(b)        it should not invest or deposit its funds for any period during the previous year otherwise than in any one or more of forms or mode specified in section: 11(5)

However the following are the exceptions to the above requirement of funds to be invested as per provisions of section 11(5).

(i)         where assets held form part of the corpus of the fund, trust or institution or any university or other educational institution or any hospital or other medical institution as on 1.6.1973;

(ii)        where asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution which form part of its corpus as on 1.6.1998.

(iii)       where assets (being debentures issued by, or on behalf of, any company or corporation), were acquired by the fund. trust of institution or any university or other medical institution before L3.1983;

(iv)       where there is any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) and (ii) above, by way of bonus shares allotted it;

(v)        where voluntary contributions are received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the official gazette, specify;

(vi)       where voluntary contribution is received in kind, it has not been held in a mode other than 11(5) after the expiry of I year from the end of the previous year in which such asset is acquired.

10. Levy of Tax where the Charitable Institution ceases to exist or converts into a Non- Charitable Organization [Chapter XIIEB containing Sections 115TD to 115TF]

(1).  [Section 115TD]- Tax on Accreted Income of Trust or Institution

(i)      [Section 115TD (1)]- Accreted income of Trust or Institution to be taxed at the Maximum Marginal Rate in certain cases:

Notwithstanding anything contained in this Act, where in any previous year, a trust or institution registered under section 12AA has—

(a)        converted into any form which is not eligible for grant of registration under section 12AA:

(b)        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

(c)        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 section 10(23C) (iv), (v), (vi) or (via), within a period of 12 months from the end of the month in which the dissolution takes place,

then, in addition to the income-tax chargeable in respect of the total income of such trust or institution, the accreted income of the trust or the institution as on the specified date shall be charged to tax and such trust or institution, as the case may be, shall be liable to pay additional income-tax (herein referred to as tax on accreted income) at the maximum marginal rate on the accreted income.

(ii)(a) Meaning of Accreted Income [(Section 115TD (2)]:

The accreted income for the purposes of section 115TD (1) means the amount by which the aggregate fair market value of the total assets of the trust or the institution, as on the specified date, exceeds the total liability of such trust or institution computed in accordance with the method of valuation as may be prescribed.

(b)    Certain assets and liabilities to be ignored for the purpose of computing the Accreted Income (First, Second and Third provisos to Section 115TD (2)

The following assets and liabilities shall be ignored for the purpose of computing the accreted income:

(1)        So much of the accreted income as is attributable to the following asset and liability, if any, related to such asset shall be ignored for the purposes of section 115TD (1), namely: —

(i)         any asset which is established to have been directly acquired by the trust or institution out of its income of the nature referred to in section 10(1) (i.e., agricultural income):

(ii)        any asset acquired by the trust or institution during the period beginning from the date of its creation or establishment and ending on the date from which the registration under section 12AA became effective, if the trust or institution has not been allowed any benefit of sections 11 and 12 during the said period [First proviso]

However, where due to the first proviso to section 12A (2), the benefit of sections 11 and 12 have been allowed to the trust or the institution in respect of any previous year or years beginning prior to the date from which the registration under section 12AA is effective, then, for the purposes of clause (ii) given above, the registration shall be deemed to have become effective from the first day of the earliest previous year. [Second proviso]

(2)        While computing the accreted income in respect of a case referred to in clause (c) of section 115TD(1) above (i.e. transfer upon dissolution), assets and liabilities, if any, related to such asset, which have been transferred 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 section 10(23C)(iv), (v), (vi) or (via), within the period specified in the said clause, shall be ignored. [Third proviso]

(iii) [Section 115TD (3)]- When the Trust or an Institution shall be deemed to have been converted into any form not eligible for Registration u/S 12AA [Section 115TD (3)]:

For the purposes of section 115TD (1), a trust or an institution shall be deemed to have been converted into any form not eligible for registration under section 12AA in a previous year, if, —

(i)         the registration granted to it under section 12AA has been cancelled; or

(ii)        it has adopted or undertaken modification of its objects which do not conform to the conditions of registration and it, —

(a)        has not applied for fresh registration under section 12AA in the said previous year: or

(b)        has filed application for fresh registration under section I2AA but the said application has been rejected.

(iv) [Section 115TD (4)]- Tax on the accreted income to be payable even if no income-tax is payable on total income of the trust or institution [Section 115TD (4)]:

Notwithstanding that no income-tax is payable by a trust or the institution on its total income computed in accordance with the provisions of this Act, the tax on the accreted income under section 115TD (1) shall be payable by such trust or the institution.

(v)     [Section 115TD (5)]- Time Limit for Payment of Tax on Accreted Income:

The principal officer or the trustee of the trust or the institution, as the case may be, and the trust or the institution shall also be liable to pay the tax on accreted income to the credit of the Central Government within 14 days from, —

(i)         the date on which, —

(a)        the period for filing appeal under section 253 against the order cancelling the registration expires and no appeal has been filed by the trust or the institution; or

(b)        the order in any appeal, confirming the cancellation of the registration, is received by the trust or institution,

in a case referred to in clause (i) of section 115TD (3);

(ii)        the end of the previous year in a case referred to in sub-clause (a) of clause (ii) of section 115TD (3) (i.e., the trust has not applied for fresh registration under section I2AA in the said previous year);

(iii)       the date on which, —

(a)        the period for filing appeal under section 253 against the order rejecting the application expires and no appeal has been filed by the trust or the institution; or

(b)        the order in any appeal, confirming the cancellation of the application, is received by the trust or institution,

in a case referred to in sub-clause (b) of clause (ii) of section 115TD (3);

(iv)       the date of merger in a case referred to in clause (b) of section 115TD (1);

(v)        the date on which the period of 12 months referred to in clause (c) of section II5TD(l) expires.

(vi)    [Section 115TD (6)]- Credit of Tax Paid on Accreted Income not available:

The tax on the accreted income by the trust or the institution shall be treated as the final payment of tax in respect of the said income and no further credit therefor shall be claimed by the trust or the institution or by any other person in respect of the amount of tax so paid.

(vii) [Section 115TD (7)]- Deduction under any other provisions of the Act not allowed in respect of income charged or the tax paid as per section 115TD (1):

No deduction under any other provision of this Act shall be allowed to the trust or the institution or any other person in respect of the income which has been charged to tax under section 115TD (1) or the tax thereon.

(2) [Section 115TE]- Interest payable for Non-payment of Tax by Trust or Institution

Where the principal officer or the trustee of the trust or the institution and the trust or the institution fails to pay the whole or any part of the tax on the accreted income referred to in section 115TD(1), within the time allowed under section 115TD(5), he or it shall be liable to pay simple interest @ 1% for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.

(3) [Section 115TF]- When Trust or Institution is deemed to be Assessed in Default

According to section 115TF (1), if any principal officer or the trustee of the trust or the institution and the trust or the institution does not pay tax on accreted income in accordance with the provisions of section 115TD, then, he or it shall be deemed to be an Assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income- tax shall apply.

Further, according to section 115TF(2), notwithstanding anything contained in section 115TF(1), in a case where the tax on accreted income is payable under the circumstances referred to in clause © of section 115TD (1), the person to whom any asset forming part of the computation of accreted income under section 115TD(2) thereof has been transferred, shall be deemed to be an Assessee in default in respect of such tax and interest thereon and all the provisions of this Act for the collection and recovery of income-tax shall apply:

Provided that the liability of the person referred to in section 115TF (2) shall be limited to the extent to which the asset received by him is capable of meeting the liability.

11. [Section 139(4A)]- Return of Income of Charitable Trust and Institution

Every person who is in receipt of the following income for which he is taxable, must file a Return of Income, in such income (computed before allowing any exemption under section 11 and 12) exceeds the maximum amount not chargeable to tax:

(a)        income derived from property held under trust or other legal obligation wholly for or charitable purposes or religious purposes, or in part only for such purposes: or

(b)        income by way of voluntary contribution on behalf of such trust or institution.

The return of income must be furnished in Form No. ITR-7 and verified in the prescribed manner containing all the prescribed particulars. Such return of income must be furnished by the representative Assessee within the time prescribed under section 139(1) electronically under digital signature or otherwise.

(1). Due date of Filing Return of Charitable Trust:

The due date of filing the return of income of charitable trust shall be 30th September of the assessment year as where the income of a charitable trust, before claiming exemption under section 11 to 12 exceeds the maximum amount chargeable to tax, its accounts are required to be audited. If it does not wish to take exemption under sections Il and 12 then the due date shall be 31st July of the assessment year.

(2).  Consequences of Failure to Furnish Return

(1)        If the trust or charitable institute fails to furnish the return of income or fails to furnish the same within the time allowed, then, the charitable trust shall be liable to pay a penalty under section 272A (2) which shall be 100 for every day during which the failure continues.

(2)        Fee for default in furnishing return of income. [Section 234F]

(3)        Exemption under sections 11 and 12 to the trust shall not be allowed if it does not furnish the return of income within the time allowed under section 139 [Section 12A (1) (ba)]

Note:

1.         Section 272A (2) provides for specific penalty in case of charitable or religious trust for not filing of return of income as per section 139(4A).

2.         Return furnished under section 139(4A) is deemed to be return furnished under section 139(1) and as such it can be revised under section 139(5).

See also  Income Tax Assessment Procedure in details
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