Budget 2018 : TDS & manner of payment in respect of Trusts

As per Finance Bill, 2018 the expenditure done by charitable trust on which tax is deductible at source when not deducted or when expenditure is incurred in contravention of section 40A(3) / 40A(3A) such amount shall be chargeable to tax under the head “profits and gains of business or profession”.
This simply means that

• 30 % of the expenditure will be disallowed when charitable trust was suppose to deduct TDS & it was not deducted.
• No deduction shall be allowed in respect expenditure if payment done by trust exceeds Rs 10000 & it is done otherwise than by an account payee cheque drawn on a bank or account payee bank draft.
• Also if expenditure is claimed in particular year & payment is made in subsequent year, & payment exceeding Rs 10000 is done otherwise than by an account payee cheque drawn on a bank or account payee bank draft then the expenditure will be deemed as income under the head “profits and gains of business or profession” in year of payment.

The bare text of the Memorandum of Finance Bill 2018 is given hereby for your reference. 
Tax deduction at source and manner of payment in respect of certain exempt entities
The third proviso to clause (23C) of section 10 of the Act provides for exemption in respect of income of the entities referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of said clause in a case where such income is applied or accumulated during the previous year for certain purposes in accordance with the relevant provisions. Section 11 of the Act also contains provisions relating to income from property held for charitable or religious purposes.
At present, there are no restrictions on payments made in cash by charitable or religious trusts or institutions. There are also no checks on whether such trusts or institutions follow the provisions of deduction of tax at source under Chapter XVII-B of the Act. This has led to lack of an audit trail for verification of application of income.
In order to encourage a less cash economy and to reduce the generation and circulation of black money, it is proposed to insert a new Explanation to the section 11 to provide that for the purposes of determining the application of income under the provisions of sub-section (1) of the said section, the provisions of sub-clause (ia) of clause (a) of section 40, and of sub-sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head Profits and gains of business or profession.
It is also proposed to insert a similar proviso in clause (23C) of section 10 so as to provide similar restriction as above on the entities exempt under sub-clauses (iv), (v), (vi) or (via) of said clause in respect of application of income.
These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent years.

You may also refer:

• Advance Tax Liability for the F.Y 2017-18 | A.Y. 2018-19
• TDS Rates Chart for FY 2017-18 | AY 2018-19
• Due Dates for E-Filing of TDS/TCS Return FY 2017-18 | AY 2018-19
• Revised Form No. 3CD Tax Audit Report for A.Y 2017-18
• Income Tax Slab Rates for FY 2017-18 | AY 2018-19
• Rebate under Section 87A of Income Tax Act,1961
• DEDUCTIONS FROM GROSS TOTAL INCOME (CHAPTER VI-A)
• Income Tax Slab Rates for FY 2018-19 | AY 2019-20
• Download Memo of Budget & Finance Bill 2018
• 10 POINTS TO REMEMBER IN BUDGET 2018-19
• Section 80D limit increased to Rs 50,000 for senior citizens

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