CBDT notifies stricter rules for mergers of charitable trusts with five-year objective lock-in

Key facts

• The Central Board of Direct Taxes (CBDT) notified new rules on October 30 imposing stricter conditions on mergers of charitable trusts and non-profit organisations.
• Under the rules, the surviving organisation cannot change its objectives for five years from the end of the financial year in which the merger takes place.
• All assets, liabilities and tax obligations of the absorbed organisation, including pending tax demands, assessments and appeals, pass to the surviving organisation.
• Organisations must file a new Form 112A with the jurisdictional income tax authority within one month after the end of the month in which the merger takes effect, online via digital signature or electronic verification code.
• Both merging organisations must get their accounts audited as on the date of the merger and disclose the reasons for the merger.
• Mergers must not result in any direct or indirect benefit to specified related persons, and organisations with regular registration cannot merge with those holding provisional registration.