Special Provisions Relating to Tax on Accreted Income of Certain Trusts and Institutions - Section 115TD to 115TF - Income Tax - Ready Reckoner - Income Tax

Special Provisions Relating to Tax on Accreted Income of Certain Trusts and Institutions - Section 115TD Meaning of Accreted Income Section 115TD(1) : Tax on Accreted Income Nothwithstanding anything contained in this act, where in any previous year, a trust or institution registered under section 12AB/ 10(23C) has Conversion of Trust/Institution into a form not eligible for registration u/s 12AA/12AB or 10(23C) Merger into an entity not having similar objects and registered u/s 12AA/12AB or 10(23C) Non-distribution of assets on dissolution to any other Trust/Institution registered u/s 12AA/12AB or 10(23C) within 12 months from the end of the month in which dissolution takes place. then , in addition to the income tax chargeable in respect of the total income of such trust or institution, the accreted income of the trust or institution as on the specified date shall be charged to tax and such trust or institution . The Accreted Income of Trust/Institution registered/approved u/s 12AA/12AB (w.e.f. 01.04.2021) or 10(23C) shall be taxable at the marginal rate on the accreted income. [ MMR i.e. 39.44% (30%+12%+4%) ] Specified Date Means i.e. Date of Valuation of Assets Liability Conversion of Trust/Institution into Non-Eligible form Registration granted cancelled Date of order cancelling registration u/s 12AA / 12AB or 10(23C) Modification of objects Date of adoption or modification of any objects Merger with any other Non-Charitable Trust/Institution Date of Merger Failure to transfer asset on dissolution within 12 months Date of Dissolution Meaning of Accreted Income [ Section 115TD(2) ] the aggregate fair market value of the total assets of the specified person, as on the specified date, Less the total liability of such specified person, computed in accordance with the method of valuation specified under rule 17CB [ For more details refer this chapter ] Note The accreted income as is attributable to the following asset and liability, if any, related to such asset, shall be ignored for the purposes of section 115TD(1), namely:- Any asset which is established to have been directly acquired by the specified person out of its income of the nature referred to in section 10(1). Any asset acquired by the specified person during the period beginning from the date of its creation or establishment and ending on the date from which the registration under section 12AA or section 12AB or approval under section 10(23C) became effective, if the specified person has not been allowed any benefit of sections 11 and 12 or section 10(23C)(iv)/ (v)/ (vi)/ (via) during the said period. Where due to the provisions of the first proviso or the second proviso to section 12A(2) or the eighth proviso to section 10(23C), the benefit of sections 11 and 12, or section 10(23C)(iv)/ (v)/ (vi)/ (via) have been allowed to the specified person in respect of any previous year or years beginning prior to the date from which the registration under section 12AA or section 12AB or approval under section 10(23C) is effective, then, for the purposes of clause (ii) of the first proviso, the registration or approval shall be deemed to have become effective from the first day of the earliest previous year. While computing the accreted income in respect of a case referred to in section 115TD(1)(c), assets and liabilities, if any, related to such asset, which have been transferred to any other specified person within the period specified in the said clause, shall be ignored. Accreted Income shall be computed on the Specified Date as Under Particulars Rs. Aggregate FMV of total assets of the trust XXXX Note:- However, Following assets shall not be taken [ Section 115TD(2) ] (i) Assets proved to have been acquired out of agricultural income (ii) Assets acquired by the trust from the date of creation of trust to the date from which registration became effective under section 12AA / 12AB or 10(23C) . (iii) Assets transferred on dissolution to other trust registered under section 12AA / 12AB or 10(23C) within a period of 12 month from the end of the month in which dissolution take place. Less:- Total Liability of the Trust Note:- However the liabilities related to assets referred to in (i), (ii), and (iii) above shall not be taken into account (XXXX) Accreted Income XXXX Notes: The Exit tax shall be in addition to income taxable in hands of entity. Deemed conversion into non-eligible form in following cases Registration granted u/s 12AA/12AB or 10(23C) has been cancelled. It has adopted or undertaken modification of its objects which do not conform the conditions of registration and: It has not applied for fresh registration u/s 12AA/12AB or 10(23C) in that previous year, or It has applied for fresh registration u/s 12AA/12AB or 10(23C) but application has been rejected, or It fails to make an application in accordance with the provisions of section 10(23C)(i)/(ii)/(iii) or sub-clause (i) or sub-clause (ii) or of section 12A(1)(ac)(iii), within the period specified, which expires in the said previous year. [Amended by FA, 2023]. [Section 115TD(3)] Section 115TD(4) : Tax on Accreted Income (Exit Tax) shall be payable even if no income tax is payable by the Trust/Institution. Section 115TD(5) - Time limit for payment of tax on accreted income Period within which exit tax has to be paid to central govt. tax has to be paid to central Govt within 14 days from Case I: Conversion of Trust/Institution into non-eligible form Registration granted u/s 12AA/12AB/10(23C) has been cancelled. 14 Days from the date on which a) the period for filling appeal to ITAT against the order cancelling the registration expires No appeal has been filed by Trust/Institution. Or b) The order in any appeal confirming the cancellation of registration is received by Trust/institution. It has adopted or undertaken modification of its objects which do not conform to the condition of registration : Not applied for fresh registration 14 days from the end of Previous Year. Applied for fresh registration but rejected. 14 Days from the date on which : a) the period for filling appeal to ITAT against the order rejecting the application expires No appeal has been filed by Trust/Institution. Or b) The order in any appeal confirming the rejection of registration is received by Trust/institution. Case II: Merger with any other Non-Charitable Institutions. 14 Days from the date of merger. Case III: Failure to transfer asset to Trust/Institution registered u/s 12AA/12AB/10(23C) within period of 12 Months from the end of the month in which dissolution took place. 14 days from the date on which period of 12 months (at the end of the month in which dissolution took place) expires. Interest payable for non-payment of tax within 14 days Section 115TE Interest @1% per month or part of the month from the 15 th day till the date on which tax is actually paid. When Trust/Institution is deemed to be assessee in default Section 115TF If tax not paid the principal officer/trustee of the trust/trust/institution shall be treated as assessee deemed to be default. Further, In case of transfer of asset upon dissolution of trust to the transferee, which is not a charitable trust, the transferee of asset shall also be treated as assessee in default. However, Transferee s liability shall be limited to the extent to which asset received by him and is capable of meeting the liability.