Form 10 of the Income Tax Act: A Detailed Guide
Certain charitable and religious organisations use Form 10 to apply for income exemptions under specific provisions of the Income Tax Act of 1961. Any organisation requesting these exemptions must understand Form 10. For this reason, it is crucial for such organisations to dig deep into the essentials of Form 10 so that they can maximise their benefits. In this article, we will explain Form 10 of the Income Tax Act in detail.
Table of content
What is Form 10 of the Income Tax Act?
Form 10 is an application that religious or charitable trusts and institutions must provide to claim tax exemption on income from property held in their name. If the trust or institution wishes to accumulate more than 15% of the earnings from property held in their name, they must comply with the guidelines detailed below.
Eligibility to File Form 10
In India, any charitable or religious trust or organisation may submit Form 10 for:
Claiming an exemption from income tax under Sections 10(23C), 11, and 12AA of the Income Tax Act.
Within the parameters established by the Income Tax Act, accumulate or set aside income for future religious or charitable endeavours.
Objective of Form 10
According to Section 11 of the Income Tax Act, 15% of the income received from the property held in trust may be set aside or accumulated indefinitely. Nonetheless, if a religious organisation wishes to set aside more than 15% of its revenue for future use by charitable organisations or religious organisations for charitable purposes. If so, they must submit Form 10, which includes the reason for accumulation and a time frame of no more than five years. The institution can communicate its intention to the Income Tax Department using Form 10. It preserves their tax-exempt status while enabling these organisations to accumulate a corpus or reserve that they can use for their future goals.
Accumulation of Income Conditions
To obtain exemptions under the Income Tax Act, trusts or institutions that intend to accrue income exceeding 15% per year must comply with the following requirements:
They must submit Form 10 to their Assessing Officer.
Clearly state why the accumulation is occurring.
Indicate the accumulation period, which cannot be longer than five years.
Ensure that the methods listed in Section 11(5) are abided when depositing the accumulated funds.
On or before the deadline for filing income tax returns, submit Form 10.
Information to be Included in Form 10
You will be required to fill out Form 10 with the following information:
Information about the institution or trust, such as its name, address, PAN, registration number, and year of establishment.
Indicate which of Sections 10(23C)(a), 11(2)(a), or 11(2)(a) read with 10(21) the Form is being provided under.
The reason behind the accumulation or allocation of funds.
The quantity of accumulation
The time frame for accumulation or separation
Amount of money earned in the past, the year it was earned, the amount used up until the prior year, the amount left over for use, and the reason it was saved or accumulated.
Steps to File Form 10 of the Income Tax Act
Follow these steps to file your income tax Form 10 online:
Step 1: Go to the electronic filing portal and sign in.
Step 2: From the dashboard, choose "e-File" > "Income tax Forms" > "File Income Tax Forms"
Step 3: Scroll down to Form 10. Another option is to enter Form 10 into the search bar. Click the "File now" option to proceed.
Step 4: Select the Assessment Year for which the return is filed in step four. If you are reporting taxes on income received in FY 2023–2024, for example, select AY 2024–25.
Step 5: Once the documents required to submit the Form are verified, click "Let's Get Started."
Step 6: Enter the required data, choose "Preview," and then choose "Save."
Step 7: After reviewing the data, click "Proceed" to e-verify. E-verification can be done using the following techniques: EVC stands for Electronic Verification Code, and DSC stands for Digital Signature Certificate. Once you have entered the OTP, click "Continue" to file Form 10. Click this link to download Form 10 in PDF Format.
Due Date for Filing Form 10
The Income Tax Act's Section 11 requires that Form 10 of income tax be filed at least two months before the deadline for filing an income tax return. The May 24, 2023, Circular No. 6/2023 clarifies that Form 10 filed before the deadline for filing income tax returns would also be accepted.
Consequences of Not Filing Form 10
According to Indian tax law, there can be severe repercussions for failing to file Form 10 of income tax. Certain exemptions or deductions may no longer be available to taxpayers, which could raise their taxable income and tax obligation. Non-filing may also result in penalties and interest for non-compliance, which could lead to additional tax authorities looking into the matter. Legal action is taken against an organisation or individual, so it is essential to follow filing requirements to prevent these consequences.
Conclusion
An essential document for financial disclosure in Indian taxation is Form 10 of income tax, frequently mandated by the Securities & Exchange Commission (SEC). It functions as a registration statement for businesses going public, much like SEC filings in the US. Like the annual report, this disclosure document contains information about the company's finances, operations, and governance. Adherence to Form 10 of the Income Tax Act guarantees openness in Securities Act public offerings, enabling well-informed investment choices and upholding regulatory norms in the Indian tax system.
FAQ
Q1. What is the maximum period that a Trust or Institution can accumulate income of more than 15% for a specific purpose?
A trust or institution may only accrue income of over 15% for a particular purpose for a maximum of five years.
Q2. What are the conditions for accumulating income under Section 11 and 10(23C) of the Income Tax Act?
To obtain exemptions under the Income Tax Act, trusts or institutions that intend to accrue income exceeding 15% per year must comply with the following requirements:
• It is required that they submit Form 10 to their Assessing Officer.
• Clearly state why the accumulation is occurring.
• Indicate that the accumulation period cannot be longer than five years.
• Verify that the methods listed in Section 11(5) are followed when depositing the accumulated funds.
• On or before the deadline for filing an income tax return, submit Form 10.
Q3. What is the due date for filing Form 10?
Form 10 must be submitted two months before filing an income tax return. However, by the CBDT circular, Form 10 submitted on or before the return filing deadline will be accepted as legitimate, and exemptions will be permitted.
Q4. Is Form 10 mandatory?
However, the donee (charitable institution) must submit Form 10BD and issue Form 10BE by the new provision. It's also crucial to remember that these organisations' funding must include the following: The Act's Section 35 (1A) (i). The Act's Section 80G (5) (viii).
Q5. Who is required to file Form 10 A?
A charitable or religious trust must use Form 10A to apply for and register under Section 12A. To be eligible for exemptions under Sections 11 and 12, charitable or religious trusts must register under the Income Tax Act of India by submitting Form 10A.
Q6. Can Form 10 be withdrawn?
Such an option cannot be withdrawn once exercised during a fiscal year. You have the option to submit Form 10-IC online. The registered user can use this service to submit Form 10-IC online through the e-filing portal.
Q7. What is the difference between Form 10 and Form 9A?
The trust certifies that it cannot use the income by filing Form 9A, and the remaining amount is presumed to have been used for religious or charitable purposes. Form 10: For a maximum of five years, trusts can accumulate 85% of their income using this Form.
Q8. Why is Form 10 needed?
Form 10 can be submitted by any Indian religious or charitable trust or organisation to claim income tax exemption under Sections 10(23C), 11, and 12AA of the Income Tax Act. Within the parameters established by the Income Tax Act, accumulate or set aside income for future religious or charitable endeavours.
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