Government mulls making PAN must for registering charitable trusts

NEW DELHI: To keep a tab on funds flowing through charitable trusts, the government plans to make it mandatory for such entities to provide their Permanent Account Number ( PAN) prior to registration.

The proposal is part of efforts to address various issues raised by the Comptroller & Auditor General ( CAG) after its audit on exemptions given to charitable trusts and institutions by tax authorities.

The auditor's report, which was tabled in Parliament in December 2013, had made many observations including that Permanent Account Number (PAN) was not being made compulsory for registration of charitable trusts.

Finance Ministry is now examining the idea of making PAN mandatory for charitable trusts and institutions while getting registered, sources said.

A charitable trust has to get registered under section 12A of the Income Tax Act and in this regard, it has to apply in Form 10A as prescribed under the Income Tax Rules.

At present, Form 10A does not have a column for quoting PAN. As a result, it is not binding on the entity to provide PAN before applying for registration under 12A.

The move also comes at a time when the government is making all efforts to curb illicit fund flows.

Income Tax Department is responsible for enforcing tax exemption provisions and ensure that only genuine and eligible institutions are exempted.

During its audit, CAG had found that the department granted registrations and allowed exemptions to charitable trusts in many cases where PANs were not provided.

Interestingly, it is obligatory for entities to have PAN while filing documents and returns with the tax department.

Meanwhile, the Ministry has already put in place a database of non-profit organisations.

Further, an all India structure for exclusive jurisdiction over non-profit organisations has been created.

Sources said that post restructuring of the Income Tax Department, the exemptions division would be headed by a chief commissioner income tax, based out of the national capital. This individual would have the role of supervising the chief commissioners across the country, they added.

Also, the exemption units would deal with all non-profit organisations, including political parties claiming exemption under section 13A of the Income Tax Act, sources said.

With regard to charitable institutions, various amendments -- to tighten norms mainly pertaining to exemptions -- have also been brought into effect through Finance Act 2014.