Amended and updated notes on section 115TD of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to tax on accreted income.
Chapter XIIEB (Sections 115TD to 115TF) of the Income Tax Act 1961 deals with the provisions related to special provisions relating to tax on accreted income of certain trusts and institutions. Section 115TD of IT Act 1961-2020 provides for tax on accreted income.
Recently, we have discussed in detail section 115TC (Securitisation trust to be assessee in default) of IT Act 1961.
Today, we learn the provisions of section 115TD of Income-tax Act 1961 as amended by the Finance Act 2022. The amended provision of section 115TD is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 115TD of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section-115TD: Tax on accreted income
Section 115TD (1):
Notwithstanding anything contained in this Act, where in any previous year, a specified person has—
- (a) converted into any form which is not eligible for grant of registration under section 12AA or section 12AB, or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10;
- (b) merged with any entity other than an entity which is a trust or institution having objects similar to it and registered under section 12AA or section 12AB or approved under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or
- (c) failed to transfer upon dissolution all its assets to any other specified person within a period of twelve months from the end of the month in which the dissolution takes place,
then, in addition to the income-tax chargeable in respect of the total income of such specified person, the accreted income of the specified person as on the specified date shall be charged to tax and such specified person shall be liable to pay additional income-tax (herein referred to as tax on accreted income) at the maximum marginal rate on the accreted income.
[Sub-section(1) of section 115TD has been substituted w.e.f. 1-April-2023 by the Finance Act, 2022]
Section 115TD (2):
The accreted income for the purposes of sub-section (1) means the amount by which the aggregate fair market value of the total assets of the specified person, as on the specified date, exceeds the total liability of such specified person, computed in accordance with the method of valuation, as may be prescribed:
Provided that so much of the accreted income as is attributable to the following asset and liability, if any, related to such asset, shall be ignored for the purposes of sub-section (1), namely:—
(i) any asset which is established to have been directly acquired by the specified person out of its income of the nature referred to in clause (1) of section 10;
(ii) any asset acquired by the specified person during the period beginning from the date of its creation or establishment and ending on the date from which the registration under section 12AA or section 12AB or approval under clause (23C) of section 10 became effective, if the specified person has not been allowed any benefit of sections 11 and 12 or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 during the said period:
Provided further that where due to the provisions of the first proviso or the second proviso to sub-section (2) of section 12A or the eighth proviso to clause (23C) of section 10, the benefit of sections 11 and 12, or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 have been allowed to the specified person in respect of any previous year or years beginning prior to the date from which the registration under section 12AA or section 12AB or approval under clause (23C) of section 10 is effective, then, for the purposes of clause (ii) of the first proviso, the registration or approval shall be deemed to have become effective from the first day of the earliest previous year:
Provided also that while computing the accreted income in respect of a case referred to in clause (c) of sub-section (1), assets and liabilities, if any, related to such asset, which have been transferred to any other specified person within the period specified in the said clause, shall be ignored.
[Sub-section(2) of section 115TD has been substituted w.e.f. 1-April-2023 by the Finance Act, 2022]
Section 115TD (3):
For the purposes of sub-section (1), a specified person shall be deemed to have been converted into any form not eligible for registration under section 12AA or section 12AB or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 in a previous year, if,—
(i) the registration or approval granted to it under section 12AA, or section 12AB, or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, has been cancelled; or
(ii) it has adopted or undertaken modification of its objects which do not conform to the conditions of registration and it—
- (a) has not applied for fresh registration under section 12AA, or section 12AB, or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 in the said previous year; or
- (b) has filed application for fresh registration under section 12AA, or section 12AB, or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 but the said application has been rejected.
[Sub-section(3) of section 115TD has been substituted w.e.f. 1-April-2023 by the Finance Act, 2022]
Section 115TD (4):
Notwithstanding that no income-tax is payable by a specified person on its total income computed in accordance with the provisions of this Act, the tax on the accreted income under sub-section (1) shall be payable by such specified person.
[Sub-section(4) of section 115TD has been amended (substituted) w.e.f. 1-April-2023 by the Finance Act, 2022]
Section 115TD (5):
The principal officer or the trustee of the specified person, as the case may be, and the specified person shall also be liable to pay the tax on accreted income to the credit of the Central Government within fourteen days from,—
(i) the date on which,—
- (a) the period for filing appeal under section 253 against the order cancelling the registration expires and no appeal has been filed by the specified person; or
- (b) the order in any appeal, confirming the cancellation of the registration, is received by the specified person,
in a case referred to in clause (i) of sub-section (3);
(ii) the end of the previous year in a case referred to in sub-clause (a) of clause (ii) of sub-section (3);
(iii) the date on which,—
- (a) the period for filing appeal under section 253 against the order rejecting the application expires and no appeal has been filed by the specified person; or
- (b) the order in any appeal, confirming the cancellation of the application, is received by the specified person,
in a case referred to in sub-clause (b) of clause (ii) of sub-section (3);
(iv) the date of merger in a case referred to in clause (b) of sub-section (1);
(v) the date on which the period of twelve months referred to in clause (c) of sub-section (1) expires.
[Sub-section(5) of section 115TD has been amended (substituted) w.e.f. 1-April-2023 by the Finance Act, 2022]
Section 115TD (6):
The tax on the accreted income by the specified person shall be treated as the final payment of tax in respect of the said income and no further credit therefor shall be claimed by the specified person or by any other person in respect of the amount of tax so paid.
[Sub-section(6) of section 115TD has been amended (substituted) w.e.f. 1-April-2023 by the Finance Act, 2022]
Section 115TD (7):
No deduction under any other provision of this Act shall be allowed to specified person or any other person in respect of the income which has been charged to tax under sub-section (1) or the tax thereon.
[Sub-section(7) of section 115TD has been amended (substituted) w.e.f. 1-April-2023 by the Finance Act, 2022]
Explanation: For the purposes of this section,—
(i) “date of conversion” means,—
- (a) the date of the order cancelling the registration under section 12AB, or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, in a case referred to in clause (i) of sub-section (3); or
- (b) the date of adoption or modification of any object, in a case referred to in clause (ii) of sub-section (3);
[Sub-clause(a) in clause(i) in the Explanation of section 115TD amended (substituted) w.e.f. 1-April-2023 by the Finance Act 2022]
(ii) “specified date” means,—
- (a) the date of conversion in a case falling under clause (a) of sub-section (1);
- (b) the date of merger in a case falling under clause (b) of sub-section (1); and
- (c) the date of dissolution in a case falling under clause (c) of sub-section (1);
(iia) “specified person” means—
- (a) any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or
- (b) a trust or institution registered under section 12AA or section 12AB;’.
[Clause(iia) in the Explanation of Section 115TD newly inserted w.e.f. 1-April-2023 by the Finance Act 2022]
(iii) registration under section 12AA shall include any registration obtained under section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996).