Income Tax

Recent Amendments for Taxation of Charitable Trust introduced in the Union Budget 2017

There were many amendments in Budget 2017 were made and proposed by Finance Minister regarding Taxation of Charitable Trust.

First Amendment governing taxation of Charitable Trusts

A new clause (x) in section 56(2) has been inserted to broaden the scope and to cover the charitable trust under its ambit.

In order to prevent charitable trust practice of receiving money or the property for inadequate consideration or without consideration, it is proposed to introduce a new clause (x) in section 56(2). With the insertion of this section the money or the property received by any person for inadequate consideration or without consideration in excess of Rs. 50,000 shall be liable to income-tax under the head “Income from other sources” in the hands of the recipient. It is also anticipated to enlarge the scope of present exceptions by incorporating the receipt by certain charitable/ religious trusts or charitable institutions and any receipt by way of transfers which does not regard as transfer U/s 47 of the Income Tax Act.

Consequently, now if any property is being received by the charitable trust or by any private trust for inadequate consideration or without consideration in excess of Rs. 50,000 then it will chargeable to income-tax under the head “Income from other sources” under section 56(2)(x)  in the hands of the recipient.

Taxation of Charitable Trusts
Taxation of Charitable Trusts

 

Second Amendment to Taxation of Charitable Trusts

A new explanation to section 11 of the Income Tax Act has been inserted to provide that any amount paid or credited, out of income referred in section 11(1) (a)/11(1) (b) of the Income Tax Act, being specific contributions that they should form part of the corpus donation of the charitable/religious trust or charitable institution, shall not be regarded as an application of income of the trust.

READ  What are the Proposed Changes about Charitable Trusts?

As a result, from Financial Year 2017-18 and onwards any charitable/religious/private trust making any contribution to another trust along with the specific direction then such donation/contribution will not be regarded as the application of income and that it shall form part of corpus donation in the hands of donor trust.

Taxation of Charitable Trusts- Third Amendment

Previously charitable trust did not require for the fresh registration upon any changes or modification in its object clause, however with this new amendment it is proposed that trust registered U/s 12AA will require a fresh registration certificate by making an application to the Assessing Officer within 30 days from the date of such changes or modifications of the objects.

Taxation of Charitable Trusts- Fourth Amendment

Section 12A of the Income Tax has been further amended so that the person driving income from the property held as a charitable purpose and whose income is chargeable to income-tax shall furnish income tax return within the time specified U/s 139 of the Act.

Hence, the charitable trust will have to file income tax return within the time specified U/s 139 of the Income Tax Act.

Related Read- Charitable Organizations entitled to deduction of 15% of their Income

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