CBDT amends Rule 17 & Form 10 providing accumulation of income by entity approved u/s 10(23C)
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- Last Updated on 18 August, 2022
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Notification No. 96/2022, dated 17-08-2022
Under the provisions of the Income-tax Act, trust or institution is required to apply 85% of its income during any previous year. If it is not able to apply 85% of its income during the previous year, it can accumulate such income for a period not exceeding 5 years. As per Section 11(2), the accumulation of income is allowed subject to the fulfillment of certain conditions. However, there were no such conditions provided explicitly under the third proviso to Section 10(23C).
The Finance Act, 2022 has inserted Explanation 3 to the third proviso of Section 10(23C) to provide for accumulation-related conditions similar to Section 11.
Rule 17 of the Income-tax Rules provides for furnishing of Form 10 and Form 9A. If a trust is not able to apply 85 percent of its income in a particular year, it can accumulate the shortfall to be used for religious or charitable purposes within the next 5 years. This accumulation is allowed if the assessing officer is informed in Form 10 about the purpose of the accumulation and the period for which the income is being accumulated.
Now, the Central Board of Direct Taxes (CBDT) has amended Rule 17 to incorporate norms for filing of Form 10 by an entity approved under section 10(23C). Rule 17 has been amended to provide that a statement in Form no 10 shall be furnished to the Assessing Officer or the prescribed authority under clause (a) of Explanation 3 to the third proviso to section 10(23C).
The form shall be furnished before the expiry of the time limit to file the original return of income under section 139(1). The CBDT has also amended Form 10 incorporating necessary changes.
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