Amendments regarding taxation of Charitable Trusts in Finance Bill 2022
Charitable Trusts enjoy exemption from income tax, since they play a vital role in enriching our cultural heritage and catering to the educational, medical, socio-economical and religious needs of the people. But, in the garb of charity, there have been instances where the Charitable Trusts have misused the tax benefits given to them. Quite often it goes unnoticed too. To plug such loopholes, significant amendments were proposed in the previous budgets. The Finance Bill 2022 has made further proposals to rationalize the provisions related to the Charitable Trusts to bring uniformity, clarity on taxation in the specified circumstances and ensure their effective monitoring and implementation.
Presently, Charitable Trusts can claim exemption in respect of their income under two regimes:
- a) Trusts registered under Section 10 (23C) (hereinafter referred to as the “first regime”); and
- b) Trusts registered under Section 12AA/12AB (hereinafter referred to as the “second regime”).
Finance Bill 2022 proposes amendments under both regimes. Some amendments are made to bring constancy in the provisions of two regimes, while other amendments are made to clarify existing provisions. Such amendments are discussed in brief here below.
- Bringing 10 (23C) on par with 12AB in terms of conditions
The Finance Bill 2022 has added various new conditions to organizations having approval under section 10(23C) (iv), (v), (vi) & (via) which effectively takes away all the advantages it had before. The new conditions applicable to section 10(23C) are:
Fr Alex G. SJ
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