Income Tax New change: There has been a significant tax change; these information must now be filled out on the form

 Income Tax New change: There has been a significant tax change; these information must now be filled out on the form

Income Tax New change: There has been a significant tax change; these information must now be filled out on the form

Income Tax New Update: This amendment was made in response to specific cases that the tax department was confronted with, wherein certain nonprofit organizations attempted to subvert the legislative intent by setting up several trusts, distributing donations among themselves, and pooling fifteen percent of each level of income.

The federal government has made numerous significant changes to the tax and regulatory environment for non-profit organizations in India during the last several years, resulting in a significant transition. We'll explain in this post how non-profit organizations may submit their taxes in accordance with the Foreign Contribution Regulations Act (FCRA) and the Income Tax Act of 1961 (IT Act). We will inform you of significant changes to the tax and regulatory landscape.

Significant revisions to the Income Tax Act that are renewable every five years

In order to be eligible for an exemption from income, non-profit organizations must submit an application for registration renewal and the issuance of 80G gift receipts every five years.

Non-profit organizations used to get lifetime registration and income exempt registration in order to issue 80G gift receipts for such entities, until their registration was terminated. These registrations are now only good for five years, and in order to renew their registration, an entity must apply at least six months in advance of the five-year term ending.

Forms 10BB and 10B

Form 10B and Form 10BB audit report submission is required starting with the fiscal year 2022–2023. Recently, the tax regulatory authorities released information on the updated and comprehensive audit report format that non-profit organization auditors must provide on Forms 10B and 10BB.

Form 10B

(I) The trust's or institution's total revenue for the preceding year that, without applying the Act's sections 11 and 12, exceeded Rs 5 crore. (Or) (II) Any trust or organization that received foreign funding in the preceding year. (Or) (III) A trust or institution that, during the previous year, invested any portion of its profits outside of India.

Form 10BB

A thorough degree of information is also mandated under the new audit report.

Other Charities - Tax treatment of contributions made to other charities (effective beginning in FY 2023–2024):

Only 85% of the qualifying donations made by a trust or institution registered under section 12AA/12AB to another trust registered under section 12AA/12AB are eligible for grants of Rs. according to a clause inserted by the Finance Act, 2023. Be regarded as.

This modification was made to address specific incidents that the tax department was dealing with, when some non-profit organizations attempted to subvert the legislative objective by setting up several trusts, making gifts among themselves, and depositing fifteen percent of their revenue at each level. Was.

Restrictive clauses: (effective starting in FY 2017–18) Limitations on contributions made by one nonprofit organization to another nonprofit organization:

Restrictive measures regarding contributions made by one non-profit organization to another have been included into the tax laws by amendment. It is not permitted for a non-profit organization to donate its corpus to another non-profit organization at this time. In a similar vein, a non-profit organization may only gift non-corpus to another non-profit organization from its earnings for the current year.

Contributions to the corpus: It is mandatory to invest the contributions to the corpus in the manner outlined in section 11(5) of the IT Act (effective for the fiscal year 2021–2022).

According to Section 11(1)(d) of the IT Act, any income obtained via a voluntary donation made in accordance with a specified directive and incorporated into the trust or institution's corpus would be included against the trust or institution's overall revenue. Not going to happen.

According to the Finance Act of 2021, in order to be eligible for this exemption, the voluntary contribution must be invested in one or more of the ways listed in section 11's subsection (5), which was designed especially for this corpus, or Has to be put in.

Forms 10BD and 10BE - Electronically record all gifts received in Form 10BD, and provide donors with system-generated donation receipts in Form 10BE (effective FY 2021–2022).

Non-profit organizations are now required to file a report in Form No. 10BD on the receipt of all types of donations during a particular financial year, i.e., the financial year in which Filing is required on or before May 31 of the year immediately following the year in which the donation is received. This requirement is similar to that of filing TDS returns and issuing System Generated TDS Certificates.

In addition, the contribution receiver must provide the donor the completed Form 10BE, which was created by the system, as the donation receipt. Only if the donor has a legitimate system-generated contribution receipt in Form 10BE is he eligible to claim a deduction under Section 80G of the IT Act.

Early Form 9A and 10 filing: Effective from FY 2022–2023 forward, the deadline for submitting Forms 9A and 10 has been extended by two months.

Trusts and institutions must submit Form No. 10 or Form No. 9A, respectively, if they want to pool their revenue for future applications or choose to use considered applications. For the fiscal year 2022–2023 and beyond, there will be a two-month extension on the deadline for submitting these forms. These documents must now be submitted at least two months in advance of August 31, 2023, which is the deadline for submitting income returns.

Foreign Contribution Regulation Act Amendment

Only after registering under the Foreign Contribution Regulation Act, 2010 (FCRA) or receiving prior approval from the Central Government are charitable organizations permitted to collect donations from overseas.

Only the bank account that the FCRA has authorized, situated at the State Bank of India New Delhi Main Branch (NDMB), 11 Sansad Marg, New Delhi 110001, is open to international donations for Indian registered non-profit organizations.

When a foreign gift reaches a non-profit registered organization, it must be used for its own objectives; it cannot be donated to another non-profit group that is registered with the Federal Communications Commission.