Latest changes brought in Budget Impacting NPO sector

1) No deductions shall be allowed under Section 80G & 80GGA in respect of donations of any sum exceeding ten thousand rupees paid in cash

2)  If your income has been charged to Income Tax in one year that does not mean it will become taxable for all times to come

Since AY2009-10, sec 2(15) definition has been changed whereby objects of general public utility shall not be charitable activities if business activities are carried out in connection therewith.

This change in definition has also affected provisions of Sec10 (23C) of IT Act1961. However, as the scrutiny of all such cases for AY2009-10 were completed in December 2011, issues were faced by IT authorities while dealing with those cases where Trust/ societies were found to be covered by first and second proviso of S.2(15) i.e. business activities were found to be carried out while engaged into objects of general public utility. There has not been any specific provision of how to deal with in such circumstances. There were confusions in the minds of IT Officers possibly that apart from taking steps of revoking Sec12AA registration, are they having enough legal support in case such income is added as taxable Income.

Now with this amendment, IT act1961 has made it explicit that in case any income becomes taxable due to provisions of Sec 2(15), such income shall become taxable in the hands of the trusts / societies.  This addition shall be taken irrespective of the fact that the ITO revokes/ rescinds/ withdraws the Tax exemption status.

While going thru the Memorandum to the bill, following comment is noteworthy.

However, this temporary excess in one year may not be treated as altering the very nature of the trust or institution so as to lead to cancellation of registration or withdrawal of approval or rescinding of notification issued in respect of trust or institution.

This may be interpreted as a relief to the Societies / Trusts that in case a Society proves that the business activities are not permanent but casual or temporary in nature, then the AO may not take steps to revoke the 12AA registration.

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