Experts said the move is meant to increase due diligence on entities that enjoy tax breaks.
New Delhi: The Central Board of Direct Taxes (CBDT) has amended rules on religious and charitable trusts enjoying tax exemption to make sure that any change in their original charter that made them eligible for tax relief will warrant a re-registration.
The rules called Income-tax (First Amendment) Rules, 2018 came into force on 19 February, said an official notification. The rules insist that any change in the original charter should be brought to the notice of the tax authorities and proof of adoption or modification of the objects should be submitted as part of re-registration process.
Mint had reported on 18 October, 2017, quoting draft rules on the subject, that trusts enjoying tax exemption will need to seek fresh registration if their original charter is modified. The notification of rules brings that change into force. It also brings out the format for trusts to seek registration as well as re-registration.
Experts said the move is meant to increase due diligence on entities that enjoy tax breaks.
Naveen Wadhwa of Taxmann.com, a provider of information and services to taxpayers, said the new registration process seeks additional details from a trust such as certified copy of registration with the authorities and Aadhaar number of trustees. “The new process and detailed information sought by the tax department before granting the registration to a trust clearly shows that the government is vigilant enough before allowing any tax exemptions to trusts,” said Wadhwa.
Finance Act 2017 had made it mandatory for a trust, enjoying tax exemptions, to inform the tax authority if there is any change in its charitable object which did not match with conditions of original registration. Prior to that, there was no onus on religious and charitable institutions to report any such change.
These institutions are exempt from paying tax on their income subject to certain limits and conditions because it is used for purposes like providing relief to the poor, education, medical relief, preservation of environment and monuments, advancement of objects of general public utility and religious purpose.
