As discussed in our earlier post that now each trust might be required to get it’s books of accounts audited u/s 12A(1)(b) because of section 115BBI of the Income Tax Act.
To read full post CLICK HERE: Now all the trust have to get their books of accounts audited under Income Tax Act. Here’s why? – Taxontips
The due date for completing Audit u/s 12A(1)(b) as derived from Section 44AB of the Income Tax Act is 30.09.2023, then why are we saying that the due date for completing audit is 31.08.2023. Let’s discuss here:
As mentioned in our earlier post if a trust does not apply or spend 85% of it’s total receipt then such trust will have to pay tax at 30% on such difference amount. To avoid such tax the trust might have to make more application and for that the trust cannot just record expense payable because after 01.04.2022, only expenses which are actually paid during the year will be considered as application. Relevant explanation for same is as under:
“Explanation.—For the purposes of this section, any sum payable by any trust or institution shall be considered as application of income in the previous year in which such sum is actually paid by it (irrespective of the previous year in which the liability to pay such sum was incurred by the trust or institution according to the method of accounting regularly employed by it)”
Hence, the only suitable option to differ tax and make it’s application in future is to accumulate fund u/s 11(2) of the Income Tax Act and make it’s application within 5 years from the end of financial year for which it is accumulated.
For making the accumulation the trust had to pass a resolution, deposit funds in modes specified under Section 11(5) of the Act and file Form 10 before the Income tax department on e-filing portal.
Now, as per section 11(2) of the Act the due date for filing Form 10 was before the due date of filing Income Tax return u/s 139(1) of the Act which was logical also as accumulation many a times is finalized at the time of filing return of income or it could be kept with due date of filing Audit report under Income tax act as auditor has to mention the amount of accumulation in Tax audit report.
However, Ministry of Finance has made an amendment to Section 11(2) of the Act and now the due date for filing Form 10 for accumulation of Fund has been kept at 2 months before the due date of filing Income tax return which for the trust under audit comes to 31.10.2023 and accordingly the due date for filing Form 10 would be 31.08.2023.
Relevant extract of Section 11(2) is as under:
“(c) the statement referred to in clause (a) is furnished at least two months prior to the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year:”
Hence, to file Form 10 till 31.08.2023 the trust has to finalize it’s books of accounts also till 31.08.2023 and that’s why we were saying that this year trust will have to finalize and get’s it’s books of accounts audited till 31.08.2023.
If trust accumulates the amount and does not file Form 10 within due time then such accumulation shall not be allowed and trust will have to pay tax at 30% on such accumulated amount.
Please share your thoughts below on above topic.
Guidance on above article for Indian Income Tax by:
Naman Maloo (C.A., B.Com)
He is currently working as Partner – Direct Tax with a renowned firm in Jaipur having experience in dealing Assessments before Income Tax authority, Tax Audit, International Taxation, Tax planning for NRI, Business planning and consultation.
E-mail: firstname.lastname@example.org | LinkedIn: Naman Maloo
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