Charitable and Religious Purpose Charitable Purpose : includes Relief of the poor Education Medical relief Preservation of Environment, Monuments,Places or Objects of artistic or historicimportance Advancement of General Public Utility Religious Purpose : does not include private religiouspurpose.
1. Section 11 – Assessment(Non–Chargeability to Tax)2. Section 12 – Registration under theIT Act for getting benefitsu/s 11.3. Section 13 – Withdrawal of the benefitsLegal Provisions (IT Act ‘61)
What’s not Applicable1. Meaning of income as defined U/S 2(45)2. Heads of Income U/S 14.3. Provisions relating to assessment of BusinessIncome
Assessment u/s 143(3)/11Scheme of Section 11 1. Application of Income. 2. Accumulation of Income. 3. Chargeability to Tax.
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 Corpusfund with specific direction.c) Value of benefits (Educational and Medical) to specifiedpersons.d) Violation of Explanation to Sec. 11(1), and Sec. 11(2)Common Sources of Income
Application to be made out of Current Year’s income. At least 85% of the income to be applied for Charitable or Religiouspurpose in the current year. Application falling short of 85% can be considered as deemedapplication as per Explanation to Section 11(1)(a). Application made out of Corpus Fund or Accumulated Income ofearlier years not to be considered as application of income in thecurrent year. Application made out of Borrowed Fund not to be considered asapplication in the current year, however, repayment of Borrowed Fundwill be considered as application in the year of repayment. Application in excess of income of the current year not allowed to becarried forward for adjustment with the income of subsequent years.Application of Income
(A) As per Explanation to Section 11(1)(a)* Where 85% of income could not be applied for the reason thatit was not received during the year, that part of the income canbe applied during the PY in which it is received or during thePY immediately following. However, this application of incomewill not be allowed in the year of receipt.* Where 85% of income could not be applied for any otherreason, the same can be applied during the PY immediatelyfollowing the PY in which the same was derived. However, thisapplication of income will not be allowed in the year ofapplication.(B) As per Section 11(2)* Income can be accumulated or set apart in excess of 15% forspecific purpose and for a period not exceeding 5 years byfiling Form No. 10 and the money so accumulated or set apartis invested or deposited in specified instruments.Accumulation of Income
Non Compliance of (A) or (B) above will make that part of theincome as deemed income of the PY following the PY in whichthe Non Compliance takes place or of the PY in which theviolation takes place respectively. Any amount paid or credited out of the set apart or accumulatedincome, to any trust registered u/s 12AA or section 10(23C)shall not be treated as application of income for charitable orreligious purposes, either during the period of accumulation orthere after.Accumulation of Income
1. Eligible Institution/Organisation is aregistered Trust or Society.2. Eligible Institution/Organisation isEstablished for Operation in India.3. Eligible Institution/Organisation isEstablished for Charitable or Religiouspurpose for General Public.Registration u/s 12 – Conditions
1. Application of income for private religious purposes not forgeneral public.2. Application of income by Trust established for a particularreligious community or caste.3. Use or application of income, directly or indirectly, for thebenefit of specified persons, except:(a) By way of compliance with a mandatory term or rule ofthe Trust established before the commencement of theAct.(b) If such use or application relates to any period before 1stJune 1971 in respect of the Trust established before thecommencement of the Act.Sec.13-Withdrawal of benefit available u/s 11
4. Holding of shares in a company other than a PublicSector Company except where the shares form part ofthe Corpus of the Trust as on 1st June 1973 and anyaccretion 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 March1983.(b) Where the asset is not held (sold/transferred) afterexpiry of 1(one) year from the end of the previous yearin which such asset is acquired or the 31st March 1993,which ever is later.Sec.13-Withdrawal of benefit available u/s 11
Specific cases of benefits to specified persons1. Any part of the income or property of the trust is, or continues to be, lent toany specified person during the previous year without adequate security orinterest or both.2. Any land, building or other property of the trust is, or continues to be, madeavailable for the use of any specified person during the previous year withoutadequate rent or compensation.3. Payment of salary, allowance, etc. to any specified person for any services tothe trust, in excess of what may be reasonably paid for such services.4. Making available to any specified person services of the trust withoutadequate compensation .5. Purchase of any share, security or other property from any specified personfor a consideration which is more than adequate.6. Sale of any share, security or other property to any specified person for aconsideration which is less than adequate.7. Any income or property of the trust is diverted during the previous year toany specified person exceeding Rs.1,000/- .8. Any funds of the trust are, or continue to remain, invested for any periodduring the previous year in any concern in which any specified person hassubstantial interest.
Chargeability of Tax Tax shall be charged on the total income of theTrust at Maximum Marginal Rate or a higher rate,if applicable. Tax on anonymous donations received byInstitutions approved u/s 10(23C) or anonymousdonations with specific direction received by anyother trust, shall be charged @ 30% of aggregate ofsuch donations, if the same exceeds higher of (i)Rs. 1 lac or (ii) 5% of the total donations.