CBDT (Syllabus: GS Paper 3 – Economy)

Context: Recently, the Central Board of Direct Taxes (CBDT) clarified that according to the Finance Act, 2023, 85% of trust donations are designated for charitable or religious purposes.

Central Board of Direct Taxes (CBDT)

• About: CBDT operates as a statutory authority under the Central Board of Revenue Act, 1963, functioning within the legal framework established by this act.
• Part of: Department of Revenue in Ministry of Finance
• Historical Background: Established initially in 1924 as the Central Board of Revenue, it oversaw both direct and indirect taxes.

oSplit into two entities, CBDT for direct taxes and Central Board of Excise and Customs for indirect taxes, in 1964 due to administrative complexities.

• Structure: CBDT is headed by a Chairman and six members, each designated with specialized functions.
• Functions:

oFormulation of policies, levy and collection of direct taxes, and supervision of the Income Tax Department constitute CBDT's core functions.

oCBDT also recommends legislative changes and alterations in tax rates aligning with government policies.

Finance Act, 2023

• About: It serves as a pivotal financial document delineating tax proposals and budgetary allocations for the fiscal year 2023-24, offering a roadmap for resource allocation and tax policy streamlining.
• Provision Regarding Donations: this act specifies that donations made by trusts or institutions shall be considered as applications for charitable or religious purposes only up to 85 percent of the donation, addressing concerns about the remaining 15 percent's nature.