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Income Tax Rules providing tax exemption to charitable and religious entities modified
June, 14th 2007

Charitable and religious entities -Amendments to rules providing tax exemption 

The Ministry of Finance explained the relevant changes made to the Income Tax Rules 1962 that provided tax exemption to charitable and religious entities. The amended provisions pertained to the filing of application for registration by charitable and religious entities on or after 01 June 2007, prescribing of income tax authorities for receipt of applications, grant of approvals, etc.

Income Tax Rules Providing Tax Exemption to Charitable and Religious Entities Modified

Sections 11 and 12 of the Income Tax Act, 1961 provide for exemption of income of charitable and religious entities. In order to avail of such exemption, the entity is required to make an application for registration under section 12A in Form No. 10A to the Commissioner of Income Tax. Prior to 1st day of June. 2007, the application had to be made by the entity within one year from the date of its creation/establishment and the Commissioner had discretion to condone the delay if the application was filed belatedly. However, the Finance Act, 2007 has removed the requirement of filing the application for registration by the entity within one year and has also removed the power vested with the Commissioner for condonation of delay in respect of any application made on or after 1st day of June, 2007. A new clause (aa) to sub-section (1) of section 12A of the Income Tax Act has been inserted in this regard.

Consequent to this, in order to harmonise the existing Rule 17A and the Form No.10A Appendix II to the said Rule with the new provision, notification has been issued on 30th May, 2007 amending this Rule and Form to enable filing of application for registration by charitable and religious entities on or after the 1st day of June, 2007.

Further, income received on behalf of certain charitable and religious entities is entitled for exemption from tax in terms of sub-clauses (iv),(v),(vi) and (via) to clause (23C) of Section 10. Till now, in order to be eligible for such exemption, the entities had to be notified by Central Government (sub-clause(iv) or (v)) or had to be approved by the prescribed authorities (sub-clauses(vi) and(via)). Vide Finance Act, 2007, the approvals in respect of sub-clauses(iv) and (v) have also to be granted by the prescribed authorities with effect from 1st June, 2007. Notifications have been issued on 30th May, 2007 to amend the relevant rules viz,.Rule 2C and Rule 2CA of the Income Tax Rules, 1962 to specify the Chief Commissioners of Income Tax/Directors General of Income Tax who will be the prescribed authorities for receipt of applications and grant of approvals in terms of sub-clauses(iv),(v),(vi) and(via) to clause (23C) of Section 10. From Nos. 56 and 56D in the Appendix II to the Income Tax Rules have also been modified consequent upon these amendments.

The above notifications have been made effective from the 1st day of June, 2007.

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