3. Charitable and Religious Purpose
Charitable Purpose : includes
Relief of the poor
Education
Medical relief
Preservation of Environment, Monuments,
Places or Objects of artistic or historic
importance
Advancement of General Public Utility
Religious Purpose : does not include private religious
purpose.
4. 1. Section 11 – Assessment
(Non–Chargeability to Tax)
2. Section 12 – Registration under the
IT Act for getting benefits
u/s 11.
3. Section 13 – Withdrawal of the benefits
Legal Provisions (IT Act ‘61)
5. What’s not Applicable
1. Meaning of income as defined U/S 2(45)
2. Heads of Income U/S 14.
3. Provisions relating to assessment of Business
Income
6. Assessment u/s 143(3)/11
Scheme of Section 11
1. Application of Income.
2. Accumulation of Income.
3. Chargeability to Tax.
7. a) Income derived from property.
* Return on Investments in Assets viz Interest,
Dividend, Rent etc.
* Income from activities viz Educational, Medical,
Public Utility.
* Independent Business Undertakings held as Property.
* Business Incidental to the Attainment of the Objects.
b) Voluntary contribution other than contribution to Corpus
fund with specific direction.
c) Value of benefits (Educational and Medical) to specified
persons.
d) Violation of Explanation to Sec. 11(1), and Sec. 11(2)
Common Sources of Income
8. Application to be made out of Current Year’s income.
At least 85% of the income to be applied for Charitable or Religious
purpose in the current year.
Application falling short of 85% can be considered as deemed
application as per Explanation to Section 11(1)(a).
Application made out of Corpus Fund or Accumulated Income of
earlier years not to be considered as application of income in the
current year.
Application made out of Borrowed Fund not to be considered as
application in the current year, however, repayment of Borrowed Fund
will be considered as application in the year of repayment.
Application in excess of income of the current year not allowed to be
carried forward for adjustment with the income of subsequent years.
Application of Income
9. (A) As per Explanation to Section 11(1)(a)
* Where 85% of income could not be applied for the reason that
it was not received during the year, that part of the income can
be applied during the PY in which it is received or during the
PY immediately following. However, this application of income
will not be allowed in the year of receipt.
* Where 85% of income could not be applied for any other
reason, the same can be applied during the PY immediately
following the PY in which the same was derived. However, this
application of income will not be allowed in the year of
application.
(B) As per Section 11(2)
* Income can be accumulated or set apart in excess of 15% for
specific purpose and for a period not exceeding 5 years by
filing Form No. 10 and the money so accumulated or set apart
is invested or deposited in specified instruments.
Accumulation of Income
10. Non Compliance of (A) or (B) above will make that part of the
income as deemed income of the PY following the PY in which
the Non Compliance takes place or of the PY in which the
violation takes place respectively.
Any amount paid or credited out of the set apart or accumulated
income, to any trust registered u/s 12AA or section 10(23C)
shall not be treated as application of income for charitable or
religious purposes, either during the period of accumulation or
there after.
Accumulation of Income
11. 1. Eligible Institution/Organisation is a
registered Trust or Society.
2. Eligible Institution/Organisation is
Established for Operation in India.
3. Eligible Institution/Organisation is
Established for Charitable or Religious
purpose for General Public.
Registration u/s 12 – Conditions
12. 1. Application of income for private religious purposes not for
general public.
2. Application of income by Trust established for a particular
religious community or caste.
3. Use or application of income, directly or indirectly, for the
benefit of specified persons, except:
(a) By way of compliance with a mandatory term or rule of
the Trust established before the commencement of the
Act.
(b) If such use or application relates to any period before 1st
June 1971 in respect of the Trust established before the
commencement of the Act.
Sec.13-Withdrawal of benefit available u/s 11
13. 4. Holding of shares in a company other than a Public
Sector Company except where the shares form part of
the Corpus of the Trust as on 1st June 1973 and any
accretion to the same by way of bonus shares.
5. Investments of deposits in other than specified modes
[section 11(5)] except :
(a) Any debentures acquired by the Trust before 1st March
1983.
(b) Where the asset is not held (sold/transferred) after
expiry of 1(one) year from the end of the previous year
in which such asset is acquired or the 31st March 1993,
which ever is later.
Sec.13-Withdrawal of benefit available u/s 11
14. Specific cases of benefits to specified persons
1. Any part of the income or property of the trust is, or continues to be, lent to
any specified person during the previous year without adequate security or
interest or both.
2. Any land, building or other property of the trust is, or continues to be, made
available for the use of any specified person during the previous year without
adequate rent or compensation.
3. Payment of salary, allowance, etc. to any specified person for any services to
the trust, in excess of what may be reasonably paid for such services.
4. Making available to any specified person services of the trust without
adequate compensation .
5. Purchase of any share, security or other property from any specified person
for a consideration which is more than adequate.
6. Sale of any share, security or other property to any specified person for a
consideration which is less than adequate.
7. Any income or property of the trust is diverted during the previous year to
any specified person exceeding Rs.1,000/- .
8. Any funds of the trust are, or continue to remain, invested for any period
during the previous year in any concern in which any specified person has
substantial interest.
15. Chargeability of Tax
Tax shall be charged on the total income of the
Trust at Maximum Marginal Rate or a higher rate,
if applicable.
Tax on anonymous donations received by
Institutions approved u/s 10(23C) or anonymous
donations with specific direction received by any
other trust, shall be charged @ 30% of aggregate of
such donations, if the same exceeds higher of (i)
Rs. 1 lac or (ii) 5% of the total donations.
