New database on registration status of charities for taxation clarity

Cancellations of registration must be uploaded on I-T website by August 31

The Central Board of Direct Taxes (CBDT) has instructed its officials to create a new database of charitable institutions to track their registration status under different provisions of the Income-Tax (I-T) Act. The intent is to eliminate discrepancies in tax filings and claims of exemption.
 

“In cases where registrations or approvals have been cancelled, these details must be uploaded on the I-T department’s website by August 31,” said an official familiar with the matter.
 

CBDT, the apex body on direct tax administration, wants this database updated regularly so that individuals and companies can identify eligible institutions to donate to and claim tax benefits on those donations.
 

A new and searchable unique reference number database of charitable entities should be created to reflect the different stages of registration — whether it is provisional registration, full registration, or if it is in the approval or provisional approval stage,” said the official.

This is designed to create a more efficient, transparent, and taxpayer-friendly system that aligns with the broader objectives of economic growth and fiscal stability.
 

The I-T department recently issued thousands of reopening notices for the Assessment Year (AY) 2018-19 to entities in major cities. Most of these cases involve donations made to charitable organisations under Section 80G of the I-T Act. 

The move to create the new database comes ahead of the single exemption scheme, which takes effect from October 1. This year’s Union Budget merged two key exemption provisions for charitable entities: Section 10 (23C) and Section 11. Both Sections deal with tax benefits but have different procedures for obtaining registration and other conditions. The single exemption scheme seeks to simplify the approval and registration process for charities.
 

The I-T Act provides tax exemptions to entities, including government-funded ones, engaged in activities such as charity, religion, medical services, and education. The tax department must ensure that only the incomes of genuine and eligible trusts are exempt.

Although charitable institutions continue to enjoy exemptions, the process for availing of the exemption is now subject to review and scrutiny, following instances of misuse.

“There have been major changes in the registration process in the past few years. The application process for fresh registration has been tightened. A provisional registration for three years will be granted, to be renewed at the end of the AY from which the registration is sought. The penal provisions for non-compliance have also been expanded,” said a tax expert.

Budget 2023 also made it mandatory for charitable institutions claiming benefits to provide additional details regarding their activities, whether they are charitable, religious, or a combination of both.

They must also furnish information about donations from an individual exceeding ~2 lakh in a single day.

These measures were triggered by the Comptroller and Auditor General of India’s report, which cited trusts or institutions receiving foreign contributions without a Foreign Contribution Regulation Act registration and mismatches in figures.