We simply missed the deadline for the fresh application under s.12A(1)(ac). We have not been cancelled and nobody has rejected anything. Can the exit tax under s.115TD really apply to us?
Yes. Since the Finance Act 2022, s.115TD(3)(iii) deems a specified person to have been converted into a form not eligible for registration where it simply fails to make the application required by s.12A(1)(ac)(i), (ii) or (iii), or by the corresponding clauses of the first proviso to s.10(23C), within the period specified, where that period expires in the previous year. The consequence is tax on accreted income at the maximum marginal rate, payable within fourteen days of the end of that previous year, in addition to any income tax otherwise chargeable, with no credit and no deduction against it.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2023-04-01, reported as Section 115TD, Income-tax Act, 1961 (inserted by the Finance Act 2016 with effect from 1 June 2016; sub-section (3)(iii) and the extension to 'specified person' inserted by the Finance Act 2022). It bears on section 115TD, section 12AA, section 12AB, section 12A(1)(ac), section 10(23C), section 10(1), section 12A(2), section 253 of the Income Tax Act 1961, in Charitable Trusts & Exemption and Capital Gains Exemptions matters.
This is the most expensive consequence in the whole trust area and the one practitioners consistently underestimate, because until AY 2023-24 s.115TD could only be triggered by something the Department did — a cancellation or a rejection. Now inaction alone is enough, and the trigger runs on a calendar the trust controls: the last date for the application under s.12A(1)(ac) becomes the date of conversion, and the accreted income as on that date is the base. Two features make it worse than an ordinary demand. The charge is the excess of the aggregate fair market value of all assets over total liabilities, so it reaches the accumulated corpus of decades, not the year's income; and s.115TD(4) makes it payable even where no income tax is payable on the total income at all. The exceptions worth knowing are in the provisos to s.115TD(2) — assets acquired out of agricultural income within s.10(1), and assets acquired before registration became effective where no benefit under ss.11 and 12 was allowed for that period — and, on dissolution, assets transferred within twelve months to another specified person. A pending appeal is relevant only to the fourteen-day clock in a cancellation or rejection case; for a failure to apply, the clock simply runs from the end of the previous year.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
Read aloud by your device. Press again to stop.
Section 115TD charges tax on accreted income where, in any previous year, a specified person has converted into a form not eligible for registration under s.12AA or s.12AB or for approval under sub-clauses (iv), (v), (vi) or (via) of s.10(23C); or has merged with an entity other than one having similar objects and so registered or approved; or has failed, on dissolution, to transfer all its assets to any other specified person within twelve months from the end of the month of dissolution. 'Specified person' means a fund, institution, trust, university, other educational institution, hospital or other medical institution referred to in those sub-clauses of s.10(23C), or a trust or institution registered under s.12AA or s.12AB. Accreted income is the amount by which the aggregate fair market value of the total assets as on the specified date exceeds the total liability, computed in the prescribed manner. Sub-section (3) deems a conversion where the registration or approval has been cancelled; or where the objects have been modified so as not to conform to the conditions of registration and the person has either not applied for fresh registration or approval in that previous year or has applied and been rejected; or, under clause (iii), where it fails to make an application in accordance with clause (i), (ii) or (iii) of the first proviso to s.10(23C), or sub-clause (i), (ii) or (iii) of s.12A(1)(ac), within the period specified, which expires in that previous year.
Statutory position — no holding is asserted; this entry reproduces statutory text. The tax is at the maximum marginal rate on the accreted income and is payable in addition to the income tax chargeable on the total income (sub-section (1)), and is payable even where no income tax is payable on the total income at all (sub-section (4)). It is to be paid to the credit of the Central Government within fourteen days from the dates set out in sub-section (5): in a cancellation case, from the expiry of the s.253 appeal period without an appeal or from receipt of the appellate order confirming the cancellation; in a case falling under sub-clause (a) of clause (ii) or under clause (iii) of sub-section (3), from the end of the previous year; in a rejection case, from the expiry of the s.253 appeal period or receipt of the confirming appellate order; on a merger, from the date of merger; and on a dissolution, from the expiry of the twelve months. Payment is final: no further credit may be claimed by the specified person or anyone else (sub-section (6)), and no deduction is allowed under any other provision in respect of the income charged or the tax on it (sub-section (7)). For a clause (iii) failure, the 'date of conversion' is the last date for making the application under s.12A(1)(ac)(i), (ii) or (iii) or under clause (i), (ii) or (iii) of the first proviso to s.10(23C).
Not applicable — this entry sets out the statutory scheme rather than a court's route. The structure is worth noting: the charge in sub-section (1) is on conversion, merger or failure to transfer on dissolution, and sub-section (3) is the deeming provision that supplies most conversions in practice. Before the Finance Act 2022 that deeming provision reached only cancellation, and modification of objects followed by a failure to re-apply or a rejection; clause (iii) added a free-standing trigger that requires no departmental act at all. The first proviso to sub-section (2) excludes from accreted income assets directly acquired out of income of the nature referred to in s.10(1) and assets acquired between creation and the date registration became effective where no benefit under ss.11 and 12 was allowed for that period, the second proviso deeming registration to have become effective from the first day of the earliest previous year where the first proviso to s.12A(2) has allowed those benefits for earlier years; the third proviso excludes assets and related liabilities transferred, within the twelve months, to another registered or approved entity in a dissolution case.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppYes. Since the Finance Act 2022, s.115TD(3)(iii) deems a specified person to have been converted into a form not eligible for registration where it simply fails to make the application required by s.12A(1)(ac)(i), (ii) or (iii), or by the corresponding clauses of the first proviso to s.10(23C), within the period specified, where that period expires in the previous year. The consequence is tax on accreted income at the maximum marginal rate, payable within fourteen days of the end of that previous year, in addition to any income tax otherwise chargeable, with no credit and no deduction against it. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115TD, section 12AA, section 12AB, section 12A(1)(ac), section 10(23C), section 10(1), section 12A(2), section 253 of the Income Tax Act 1961. It is reported as Section 115TD, Income-tax Act, 1961 (inserted by the Finance Act 2016 with effect from 1 June 2016; sub-section (3)(iii) and the extension to 'specified person' inserted by the Finance Act 2022). This is the most expensive consequence in the whole trust area and the one practitioners consistently underestimate, because until AY 2023-24 s.115TD could only be triggered by something the Department did — a cancellation or a rejection. Now inaction alone is enough, and the trigger runs on a calendar the trust controls: the last date for the application under s.12A(1)(ac) becomes the date of conversion, and the accreted income as on that date is the base. Two features make it worse than an ordinary demand. The charge is the excess of the aggregate fair market value of all assets over total liabilities, so it reaches the accumulated corpus of decades, not the year's income; and s.115TD(4) makes it payable even where no income tax is payable on the total income at all. The exceptions worth knowing are in the provisos to s.115TD(2) — assets acquired out of agricultural income within s.10(1), and assets acquired before registration became effective where no benefit under ss.11 and 12 was allowed for that period — and, on dissolution, assets transferred within twelve months to another specified person. A pending appeal is relevant only to the fourteen-day clock in a cancellation or rejection case; for a failure to apply, the clock simply runs from the end of the previous year. If it applies to you, the first step is this: Diarise the s.12A(1)(ac) application dates as an exit-tax deadline rather than a registration formality, and do the same for the s.10(23C) first proviso where the institution is approved rather than registered.
Section 115TD charges tax on accreted income where, in any previous year, a specified person has converted into a form not eligible for registration under s.12AA or s.12AB or for approval under sub-clauses (iv), (v), (vi) or (via) of s.10(23C); or has merged with an entity other than one having similar objects and so registered or approved; or has failed, on dissolution, to transfer all its assets to any other specified person within twelve months from the end of the month of dissolution. 'Specified person' means a fund, institution, trust, university, other educational institution, hospital or other medical institution referred to in those sub-clauses of s.10(23C), or a trust or institution registered under s.12AA or s.12AB. Accreted income is the amount by which the aggregate fair market value of the total assets as on the specified date exceeds the total liability, computed in the prescribed manner. Sub-section (3) deems a conversion where the registration or approval has been cancelled; or where the objects have been modified so as not to conform to the conditions of registration and the person has either not applied for fresh registration or approval in that previous year or has applied and been rejected; or, under clause (iii), where it fails to make an application in accordance with clause (i), (ii) or (iii) of the first proviso to s.10(23C), or sub-clause (i), (ii) or (iii) of s.12A(1)(ac), within the period specified, which expires in that previous year. The matter was decided on 2023-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Statutory position — no holding is asserted; this entry reproduces statutory text. The tax is at the maximum marginal rate on the accreted income and is payable in addition to the income tax chargeable on the total income (sub-section (1)), and is payable even where no income tax is payable on the total income at all (sub-section (4)). It is to be paid to the credit of the Central Government within fourteen days from the dates set out in sub-section (5): in a cancellation case, from the expiry of the s.253 appeal period without an appeal or from receipt of the appellate order confirming the cancellation; in a case falling under sub-clause (a) of clause (ii) or under clause (iii) of sub-section (3), from the end of the previous year; in a rejection case, from the expiry of the s.253 appeal period or receipt of the confirming appellate order; on a merger, from the date of merger; and on a dissolution, from the expiry of the twelve months. Payment is final: no further credit may be claimed by the specified person or anyone else (sub-section (6)), and no deduction is allowed under any other provision in respect of the income charged or the tax on it (sub-section (7)). For a clause (iii) failure, the 'date of conversion' is the last date for making the application under s.12A(1)(ac)(i), (ii) or (iii) or under clause (i), (ii) or (iii) of the first proviso to s.10(23C).
Not applicable — this entry sets out the statutory scheme rather than a court's route. The structure is worth noting: the charge in sub-section (1) is on conversion, merger or failure to transfer on dissolution, and sub-section (3) is the deeming provision that supplies most conversions in practice. Before the Finance Act 2022 that deeming provision reached only cancellation, and modification of objects followed by a failure to re-apply or a rejection; clause (iii) added a free-standing trigger that requires no departmental act at all. The first proviso to sub-section (2) excludes from accreted income assets directly acquired out of income of the nature referred to in s.10(1) and assets acquired between creation and the date registration became effective where no benefit under ss.11 and 12 was allowed for that period, the second proviso deeming registration to have become effective from the first day of the earliest previous year where the first proviso to s.12A(2) has allowed those benefits for earlier years; the third proviso excludes assets and related liabilities transferred, within the twelve months, to another registered or approved entity in a dissolution case.
It was decided by the CBDT Circulars & Instructions on 2023-04-01 and is reported as Section 115TD, Income-tax Act, 1961 (inserted by the Finance Act 2016 with effect from 1 June 2016; sub-section (3)(iii) and the extension to 'specified person' inserted by the Finance Act 2022). Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 115TD, section 12AA, section 12AB, section 12A(1)(ac), section 10(23C), section 10(1), section 12A(2), section 253, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Statutory position — no holding is asserted; this entry reproduces statutory text. The tax is at the maximum marginal rate on the accreted income and is payable in addition to the income tax chargeable on the total income (sub-section (1)), and is payable even where no income tax is payable on the total income at all (sub-section (4)). It is to be paid to the credit of the Central Government within fourteen days from the dates set out in sub-section (5): in a cancellation case, from the expiry of the s.253 appeal period without an appeal or from receipt of the appellate order confirming the cancellation; in a case falling under sub-clause (a) of clause (ii) or under clause (iii) of sub-section (3), from the end of the previous year; in a rejection case, from the expiry of the s.253 appeal period or receipt of the confirming appellate order; on a merger, from the date of merger; and on a dissolution, from the expiry of the twelve months. Payment is final: no further credit may be claimed by the specified person or anyone else (sub-section (6)), and no deduction is allowed under any other provision in respect of the income charged or the tax on it (sub-section (7)). For a clause (iii) failure, the 'date of conversion' is the last date for making the application under s.12A(1)(ac)(i), (ii) or (iii) or under clause (i), (ii) or (iii) of the first proviso to s.10(23C). It arises in Charitable Trusts & Exemption and Capital Gains Exemptions matters, on section 115TD, section 12AA, section 12AB, section 12A(1)(ac), section 10(23C), section 10(1), section 12A(2), section 253 of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If a deadline has already been missed, identify the previous year in which the period expired — that is the year of deemed conversion and it fixes both the valuation date and the fourteen-day payment date under s.115TD(5)(ii). Value the exposure before deciding what to do: aggregate fair market value of all assets less total liabilities, as on the last date for making the application, taxed at the maximum marginal rate. Test each asset against the first proviso to s.115TD(2) — anything acquired out of s.10(1) agricultural income, and anything acquired before the registration became effective where no s.11 or s.12 benefit was allowed for that period, is left out. On a dissolution, transfer every asset to another specified person within twelve months of the end of the month of dissolution; the third proviso to s.115TD(2) then leaves those assets out of the computation. Do not assume that paying the tax on accreted income buys anything back — s.115TD(6) makes it final with no credit, and s.115TD(7) bars any deduction in respect of the income charged or the tax on it.
Validity check could not be completed. Validity check could not be completed in the strict sense. The text is taken from the Income-tax Department's own section page carrying the most recent year stamp available, Year: 2025, and is identical in the four most recent stamped versions on the point that matters. Those pages are year-stamped snapshots, so the possibility of a later amendment to s.115TD in the 1961 Act cannot be excluded from them alone; the 1961 Act was repealed with effect from 1 April 2026 by the Income-tax Act 2025, subject to the saving in s.536, so the Year: 2025 version is likely to be the final state of the section for the assessment years this library covers, but that has not been independently confirmed. No decision applying s.115TD(3)(iii) was located on indiankanoon: a phrase search for 'fails to make an application' together with '115TD' returned only s.352 of the Income-tax Act 2025. The two entries already in this library on s.115TD — CBDT Circular 3/2017 and Sarvajanik Seva Trust — both concern the pre-Finance Act 2022 footing. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry states the statute, not a decision, and the sourcing needs to be read with care. The value in 'decided_on', 1 April 2023, is the date from which sub-section (3)(iii) takes effect and not the date of any decision; 'tier' is set to 'cbdt' because the library's fixed tier vocabulary has no value for a statutory entry, and the source is the Income-tax Department's own section page, not a Board circular. The Income-tax Department's own section pages are year-stamped snapshots and the older ones are archived; the text here is taken from the page stamped Year: 2025, which is the most recent version of s.115TD published there, and was checked against the pages stamped Year: 2023, Year: 2024 (No. 1) and Year: 2024 (No. 2), all four of which carry sub-section (3)(iii) in identical terms. The page stamped Year: 2022 does not carry clause (iii) at all, which places its insertion between those two versions and is consistent with the Finance Act 2022. The commencement date of 1 April 2023 is stated on that basis and was NOT read from the text of the Finance Act 2022, which could not be retrieved. That the section was originally inserted by the Finance Act 2016 with effect from 1 June 2016 is taken from two Tribunal orders read in full for this batch, ITAT Chandigarh in Punjab Cricket Association (9 July 2020) and ITAT Mumbai in Sarvajanik Seva Trust (28 January 2025). The Explanation's definition of 'specified date' refers only to cases falling under clauses (a), (b) and (c) of sub-section (1); in a deemed-conversion case under sub-section (3) the route is clause (a) of sub-section (1) and the applicable date is the 'date of conversion', which for a clause (iii) failure is defined as the last date for making the application. Sections 115TE and 115TF, which carry interest and the liability of the principal officer and trustees, were not read for this entry and nothing is stated about them. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Statutory position — no holding is asserted; this entry reproduces statutory text. The tax is at the maximum marginal rate on the accreted income and is payable in addition to the income tax chargeable on the total income (sub-section (1)), and is payable even where no income tax is payable on the total income at all (sub-section (4)). It is to be paid to the credit of the Central Government within fourteen days from the dates set out in sub-section (5): in a cancellation case, from the expiry of the s.253 appeal period without an appeal or from receipt of the appellate order confirming the cancellation; in a case falling under sub-clause (a) of clause (ii) or under clause (iii) of sub-section (3), from the end of the previous year; in a rejection case, from the expiry of the s.253 appeal period or receipt of the confirming appellate order; on a merger, from the date of merger; and on a dissolution, from the expiry of the twelve months. Payment is final: no further credit may be claimed by the specified person or anyone else (sub-section (6)), and no deduction is allowed under any other provision in respect of the income charged or the tax on it (sub-section (7)). For a clause (iii) failure, the 'date of conversion' is the last date for making the application under s.12A(1)(ac)(i), (ii) or (iii) or under clause (i), (ii) or (iii) of the first proviso to s.10(23C).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
Our trust was formed weeks ago and has done nothing yet. Can registration be refused for that?
Is payment of admitted tax under s.249(4) a condition that must be satisfied again when the appeal goes on to the Tribunal?
I sell timber from forest land that we prune, weed and replant. Is that agricultural income?