Section 115TE — the law in short
What the courts have decided on section 115TE, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Statutory position — s.12AC: a registered trust may merge into another without Chapter XII-EB, but only on three conditions, one of which is still to be prescribed
CBDT Circulars & InstructionsCuts both waysNo later treatment found
Our society wants to merge into a larger trust that does the same work. Both are registered. Will the merger trigger the exit tax on accreted income, and what do we have to get right?
Section 12AC, inserted after section 12AB by the Finance (No. 2) Act, 2024 with effect from 1 April 2025, says that where a trust or institution registered under section 12AB, or approved under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, merges with another trust or institution, the provisions of Chapter XII-EB shall not apply if three conditions are met: the other trust or institution has same or similar objects; the other trust or institution is registered under section 12AA or section 12AB or approved under those same sub-clauses of section 10(23C); and the merger fulfils such conditions as may be prescribed. Chapter XII-EB is the exit tax — the charge on accreted income under section 115TD, the interest under section 115TE and the personal liability under section 115TF. Where any of the three conditions fails, the section simply does not apply and the Chapter is left in place.
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CBDT Circular 3/2017
CBDT Circulars & InstructionsHelps departmentSuperseded by amendment
My trust is surrendering registration or merging. What is the s.115TD tax on accreted income?
An additional tax at the maximum marginal rate on accreted income — the fair market value of total assets less liabilities on the specified date — triggered by conversion into a non-charitable form, merger with a non-eligible entity, or failure on dissolution to transfer assets to another eligible institution within twelve months. It is a levy on the net asset position, not on the year's income.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
