Tax Ready Reckoner

Under the Income Tax Act, 1961, the Commissioner of Income Tax (Exemption) [CIT(E)] has the authority to cancel or withdraw the registration granted to charitable/religious trusts under Sections 12A, 12AA, or 12AB. Here are the key provisions: 1. Legal Basis for Cancellation Section 12AA(3): Empowers CIT to cancel registration if: The trust’s activities are not genuine, or It is not complyingwith the conditions […]

Section 13 of the Income Tax Act, 1961 specifies situations where the tax exemptions under Section 11 (for charitable/religious trusts) will NOT be available. These are anti-abuse provisions to prevent misuse of trust funds for private gain. 1. Private Benefit to Specified Persons [Section 13(1)(c)] Exemption is denied if trust income/property benefits: Founder/authorof the trust Substantial

1. Covered Entities (Section 10(23C)) The following enjoy 100% tax exemption on their income: Funds/institutions for: Charitable purposes (iv) Religious purposes (v) Key institutions: Educational (iiiab) Medical (iiiac) Housing (iiiad) Sports (iiiae) Specifically notified: IITs/IIMs/AIIMS (vi) National importance institutions (viia) 2. Mandatory Conditions For continuing exemption: Registration: Must file Form 10BB (new) Income Application: 85%

Section 164(2) of the Income Tax Act, 1961, deals with the taxation of discretionary trusts, including charitable and religious trusts, where the beneficiaries’ shares are indeterminate or unknown. Below is a detailed analysis of its applicability, conditions, and tax implications. 1. Applicability of Section 164(2) This section applies when: ✅ Trust income is discretionary (beneficiaries’ shares are not fixed). ✅ Trust is not

1. Key Provision (Section 13(8)) Introduced by Finance Act 2022(Effective AY 2023-24) Applies whena trust’s “aggregate receipts from commercial activities” exceed: 20% of total receipts(₹25 lakh threshold removed post-2023) Consequence: Entire incomebecomes taxable (not just commercial portion) 2. What Qualifies as “Commercial Receipts”? INCLUDED EXCLUDED • Fees from non-charitable services • Rental income from non-trust properties • Business

Introduced by the Finance Act, 2023, these provisions impose a “Ceasing Tax” on charitable/religious trusts that: Dissolve/terminate operations, or Convert into a non-charitable entity(e.g., private trust, company). 1. Key Provisions (A)  Section 115TB: Charge of Tax Tax Rate: 30%(plus surcharge & cess) on the “net accumulated income” Applicable to: Trusts registered under Sections 12A, 12AA, 12AB Institutions approved under Section 10(23C) (B)  Section