Changes in the Finance Bill 2016 as passed by the Lok Sabha
On May 5, 2016,
the Lok Sabha passed the Finance Bill
2016. The Bill which was presented originally in the Lok Sabha on February 29, 2016 has not been passed in its original
form. Various changes
have been made in the Bill and new amendments have been proposed while some
earlier proposed amendments have been removed.
the Lok Sabha passed the Finance Bill
2016. The Bill which was presented originally in the Lok Sabha on February 29, 2016 has not been passed in its original
form. Various changes
have been made in the Bill and new amendments have been proposed while some
earlier proposed amendments have been removed.
Where
charitable organizations are concerned, the following is of interest:
charitable organizations are concerned, the following is of interest:
Tax on Accreted Income of Trusts
The Finance Bill, 2016 proposed to insert a new Chapter XII-EB,
containing Section 115TD, 115TE and 115TF, under the Act to provide that
‘accreted income’ of a trust or institution registered under section 12AA shall
be chargeable to tax at the maximum marginal rates in following circumstances:
containing Section 115TD, 115TE and 115TF, under the Act to provide that
‘accreted income’ of a trust or institution registered under section 12AA shall
be chargeable to tax at the maximum marginal rates in following circumstances:
a. If the trust or institution gets converted into any form which is
not eligible under section 12AA;
not eligible under section 12AA;
b.
If the trust or institution
gets merged into any entity which is not eligible under section 12AA;
If the trust or institution
gets merged into any entity which is not eligible under section 12AA;
c.
If the trust or institution, in
case of dissolution, fails to transfer its assets to exempt entities under
section 12AA and section 10(23C) (iv), (v), (vi) & (via).
If the trust or institution, in
case of dissolution, fails to transfer its assets to exempt entities under
section 12AA and section 10(23C) (iv), (v), (vi) & (via).
The difference between the fair market value of the assets and
liabilities of the trust or institution would be treated as ‘accreted income’
and tax thereon shall be paid in addition to the income-tax chargeable in
respect of the total income of such trust or institution.
liabilities of the trust or institution would be treated as ‘accreted income’
and tax thereon shall be paid in addition to the income-tax chargeable in
respect of the total income of such trust or institution.
The Finance Bill, 2016 as passed by the Lok Sabha makes certain
changes in the proposed Section 115TD, as under:
changes in the proposed Section 115TD, as under:
A. Assets which don’t form part of
accreted income
accreted income
A proviso is inserted in Section 115TD to provide that the value
of the following assets shall not be taken into consideration while computing
the ‘accreted income’:
of the following assets shall not be taken into consideration while computing
the ‘accreted income’:
a.
Any asset acquired by a trust or
institution out of its agricultural income.
Any asset acquired by a trust or
institution out of its agricultural income.
b.
Any asset acquired by the trust
before getting registered under section 12AA provided that no exemption under
section 11 or 12 is provided to trust or institution during that period.
Any asset acquired by the trust
before getting registered under section 12AA provided that no exemption under
section 11 or 12 is provided to trust or institution during that period.
B. Time-limit to pay tax on accreted
income
income
As per section 115TD, a trust or an institution shall be deemed
to have been converted into any form not eligible for registration under
section 12AA in a previous year on occurrence of following events:
to have been converted into any form not eligible for registration under
section 12AA in a previous year on occurrence of following events:
a. when registration granted to it under Section 12AA has been
cancelled; or
cancelled; or
b. It has adopted or undertaken modification of its objects which do
not conform to the conditions of registration and it:
not conform to the conditions of registration and it:
·
has not applied for fresh registration
under Section 12AA in the said previous year; or
has not applied for fresh registration
under Section 12AA in the said previous year; or
·
has filed application for fresh
registration under Section 12AA but the said application has been rejected.
has filed application for fresh
registration under Section 12AA but the said application has been rejected.
It was proposed under Finance Bill, 2016 that the tax on
accreted income shall be payable within 14 days from date of receipt of order
cancelling registration or date of order rejecting application for fresh
registration.
accreted income shall be payable within 14 days from date of receipt of order
cancelling registration or date of order rejecting application for fresh
registration.
The Finance Bill, 2016 as passed by the Lok Sabha has proposed
new time-limit for payment of tax on accreted income. It has been prescribed
that tax on accreted income shall be paid within 14 days from:
new time-limit for payment of tax on accreted income. It has been prescribed
that tax on accreted income shall be paid within 14 days from:
aa.
the date
on which the period for filing appeal before ITAT against the order cancelling
the registration (or order rejecting the application) expires, if no appeal has
been filed by the trust or the institution; or
the date
on which the period for filing appeal before ITAT against the order cancelling
the registration (or order rejecting the application) expires, if no appeal has
been filed by the trust or the institution; or
bb.
the date on which the order in
any appeal, confirming the cancellation of the registration (or application),
is received by the trust or institution.
the date on which the order in
any appeal, confirming the cancellation of the registration (or application),
is received by the trust or institution.
Validity of registration obtained
under section 12A
under section 12A
The Finance Bill, 2016 as passed by the Lok Sabha has made a
clarificatory amendment to provide that registration under section 12AA shall
include any registration obtained earlier under section 12A.
clarificatory amendment to provide that registration under section 12AA shall
include any registration obtained earlier under section 12A.
The bill will now require approval of the Rajya Sabha after
which it will be sent to the President for his Assent and on receipt of assent
the same will become and act applicable from the date of its notification in
the official gazette.
which it will be sent to the President for his Assent and on receipt of assent
the same will become and act applicable from the date of its notification in
the official gazette.
For any further clarifications, write to connect@capindia.in