Finance Bill, 2023 Applicability of Exit Tax Under Section 115TD115TF on Failure to File Application by Trusts or Institutions Within Specified Time

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers Finance Bill, 2023--Chritable Trusts Applicability of Exit Tax Under Section 115TD-115TF on Failure to File Application by Trusts or Institutions Within Specified Time CA. Nisha Bhandari Under the present scheme of law, the trusts or institutions under both the regimes may avoid paying exit tax by not applying for re-registration or registration or for re-approval or approval due to lack of clarity in the related provisions. The Finance Bill, 2023 therefore proposes to amend Section 115TD to plug the existing loop pole and to provide clarity regarding levy of exit tax. 1. Filing of application for re-registration or re-approval and for provisional registration or approval The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 amended the provisions related to application for registration by amending the first and second proviso to clause (23C) of Section 10, clause (ac) of sub-section (1) of Section 12A so as to provide the following : (a) All the existing trusts and institutions under the first and second regime are required to apply for re-registration/approval on or before three months from 1-4-2021. This date was extended from time-to-time till 31.03.2022. The due date for re-registration/approval has been extended by the Central Board of Direct Taxes till 25-11-2022 vide Circular No. 22 of 2022, dated 1-11-2022. Such re-registration/approval shall be valid for a period of 5 years. (b) New trusts and institutions under the first and second regime are required to apply for the provisional registration/approval at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration/approval is sought. Such provisional registration/approval shall be valid for a period of three years. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Finance Bill, 2023--Chritable Trusts

Applicability of Exit Tax Under Section 115TD-115TF on Failure to File Application by Trusts or Institutions Within Specified Time

CA. Nisha Bhandari

Under the present scheme of law, the trusts or institutions under both the regimes may avoid paying exit tax by not applying for re-registration or registration or for re-approval or approval due to lack of clarity in the related provisions. The Finance Bill, 2023 therefore proposes to amend Section 115TD to plug the existing loop pole and to provide clarity regarding levy of exit tax.

1. Filing of application for re-registration or re-approval and for provisional registration or approval

The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 amended the provisions related to application for registration by amending the first and second proviso to clause (23C) of Section 10, clause (ac) of sub-section (1) of Section 12A so as to provide the following :

(a) All the existing trusts and institutions under the first and second regime are required to apply for re-registration/approval on or before three months from 1-4-2021. This date was extended from time-to-time till 31.03.2022. The due date for re-registration/approval has been extended by the Central Board of Direct Taxes till 25-11-2022 vide Circular No. 22 of 2022, dated 1-11-2022. Such re-registration/approval shall be valid for a period of 5 years.

(b) New trusts and institutions under the first and second regime are required to apply for the provisional registration/approval at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration/approval is sought. Such provisional registration/approval shall be valid for a period of three years.