Government makes life more difficult for charitable trusts

MUMBAI: The Commissioner of Income Tax now has broad powers to cancel the registration of a trust or charitable institution if it has violated any requirement under any other law.

At the time of granting the registration under Section 12AA (since, the exemption under the IT Law is available for the trust), the commissioner must ensure that the trust has complied with the requirements of other laws that are material to the trust. meet the objectives of trust.

Second, a registration already granted may be canceled by the commissioner if the requirements of such laws were subsequently violated. However, trust is given the opportunity to be heard.

The consequences of cancellation are onerous. For starters, your income will no longer be tax free. The biggest blow is an exit tax that will be paid on the fair market value of your net assets, at the maximum marginal rate of 42.74%. This will seriously affect educational institutions and hospitals in Tier-1 cities such as Mumbai that have valuable properties, such as buildings or land. In fact, they may not have the funds to support the exit. tax burden , the experts said.

Allowing the commissioner to decide whether or not there is compliance with any other law is a dangerous provision. Other laws can not and should not be applied through the I-T Law. In the best of cases, the commissioner should be allowed to present obvious infractions to the notification of the corresponding authority under that respective Law, who can decide if there is a violation and take measures, said Gautam Nayak, fiscal partner of CNK u0026 Associates.