Rationalisation of provisions for charitable trusts/institutions

In Union Budget 2025, the proposed changes to the provisions for charitable trusts and institutions aim to make compliance easier and reduce administrative challenges. The amendments include clarifying that incomplete registration applications won’t lead to automatic cancellation. For smaller trusts or institutions with income under ₹5 crores, the registration validity period will be extended from 5 to 10 years. Additionally, changes to section 13 redefine who is excluded from tax exemptions, focusing on people who contribute more than ₹1 lakh annually or ₹10 lakh in total. These updates are intended to simplify processes for smaller trusts while ensuring compliance with regulations. Learn more details about these provisions in this article. 

Rationalisation of ‘specified violation’ for cancellation of registration of trusts or institutions

It is proposed to amend the Explanation to sub-section (4) of section 12AB so as to provide that the situations where the application for registration of trust or institution is not complete, shall not be treated as specified violation for the purpose of the said sub-section. The objective of the amendment is to ensure that registration is not cancelled on the ground of incorrect application.

Period of registration of smaller trusts or institutions

To reduce the compliance burden for the smaller trusts or institutions, it is proposed to increase the period of validity of registration of trust or institution from 5 years to 10 years, in cases where the trust or institution made an application under sub-clause (i) to (v) of the clause (ac) of sub-section (1) of section 12A, and the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12, does not exceed Rs. 5 crores during each of the two previous years, preceding to the previous year in which such application is made.

Learn more: Registration of Charitable trust

Rationalisation of persons specified under sub-section (3) of section 13 for trusts or institutions

As per Section 13 of the Act, the exemption under section 11 or section 12 shall not apply to any income from the total income of trust of institution, if such income enures, or such income or any property of the trust or the institution is used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3).

It is proposed to amend the sub-section (3) of section 13 to provide that, –

• (i) persons referred to in clause (b) of sub-section (3) of section 13, shall be any person whose total contribution to the trust or institution, during the relevant previous year exceeds one lakh rupees, or, in aggregate up to the end of the relevant previous year exceeds ten lakh rupees, as the case may be;
• (ii) relative of any such person as mentioned in (i) above, shall not be included in persons specified in sub-section (3) of section 13; and
• (iii) any concern in which any such person as mentioned in (i) above has a substantial interest, shall not be included in persons specified in sub-section (3) of section 13.

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