This Tax Alert summarizes Circular No. 6/2023 dated 24 March 2023 (Circular) issued by the Central Board of Direct Taxes (CBDT), for extending certain due dates applicable to charitable trusts and other eligible institutions (Charitable Institutions) and various other aspects affecting compliance arising out of certain amendments made by Finance Act 2023.
The key highlights from the Circular are as follows:
Finance Act 2023 has with effect from tax year 2022-23, amended the scope of
exit tax by including cases of default by existing charitable institutions in
migrating to new regime of registration process introduced in 2021 or
charitable institutions with provisional registration have failed to apply for
final registration. Under exit tax levy, taxpayer is liable to pay tax at
maximum marginal rate on the accreted income being excess of fair value of
assets over amount of liabilities.
Prior to amendment, CBDT had from time-to-time extended due date of compliance
of registration/renewal. For migration of existing trust to new regime, last
extended due date was 25 November 2022 and for final registration of
provisionally registered trust, 30 September 2022. In order to mitigate
hardships caused to charitable institutions who failed to migrate to new regime
or who have failed to apply for final registration or provisional registration
by due dates, circular grants extended time for compliance up to 30 September
2023. Once such belated application within such extended time made is accepted
and registration is granted, provision of exit tax levy is not to apply.
Consistent with extension so provided also to the charitable institution which
is approved under ITL as an entity donation to which will qualify for deduction
in the hands of donors, the due date for furnishing statement of donation in
Form 10BD by such charitable institutions and donation certificate in Form 10BE
for receipt of donation during FY 2022-23 is extended to 30 June 2023.
Further, the Finance Act 2023 prepones the date of furnishing statement of
accumulation in Form 10 and deemed application in Form 9A to at least two
months prior to due date of furnishing return of income. In deference to the
concerns raised that such statements are linked to finalization of total income
which may be done around due date of filing tax return, Circular clarifies that
the charitable institutions shall not be denied exemption as long as the
statement of accumulation/deemed application of income is furnished on or
before the due date of furnishing return of income.
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