The newly notified income tax return form for trusts, institutions i.e ITR 7 for assessment year 2016-17 has four specific changes , that must be given attention to while filing tax return. The changes are generally to accommodate the amendment made through Finance Act 2015 that affects the total income for AY 2016-17 . Previously a video on ITR for individuals was published. Here are the four changes in ITR-7
1. Fill up in ITR 7 Your Commercial Profits in %
Section 2(15) that defines charitable purpose . This definition of charitable purpose was amended vide Finance Act 2015 to provide that any activity in the nature of trade, commerce or business shall not be regarded as charitable activity if the profit from such commercial activity is more than 20% of the total receipts of the trust. ITR-7 has been modified to accommodate the amendment by insertion of a fields to disclose percentage of commercial receipts and total receipts.
2. Confirm if Option in Form 9A Filed ?
A charitable trust has to apply the income to the extent of 85 % . Finance Act 2015 brought in changes in Explanation to section 11(1) by which trusts who could not use will have to file am Option form in Form 9 . The said amendment was as under:
Explanation.—For the purposes of clauses (a) and (b),—
(1) in computing the fifteen] per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income;
(2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of eighty-five per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount—
(i) for the reason that the whole or any part of the income has not been received during that year, or
(ii) for any other reason,
(a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and
(b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount,
may, at the option of the person in receipt of the income (such option to be exercised in writing before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income)] be deemed to be income applied to such
ITR-7 has therefore be amended to include a field where a trust is required to declare if the Form 9A was filed before due date for filing of tax return.
3. Hospitals, educational institutions to fill Govt. Financing Data
If the educational institutions, hospitals or other institutions are wholly or substantially financed by the Government, the income of such bodies are exempt under section 10(23C)(iiiab) and (iiiac) of the Income Tax Act .
ITR-7 now requires that such universities, hospitals, educational institutions, etc., have to disclose the name of financing bodies and annual receipts from them and declare the amount of finance eligible for exemption in ITR 7.
4. Income from Other Trusts
Now the ITR Forms ITR 7 have a new ‘Schedule PTI’ for reporting of pass through income of business trust/investment fund as the income is taxable in hand of members of trust or funds as per section 115UA and 115UB.