Charitable/religious
trusts are the trusts which are formed with an objective of providing relief to
poor, education ,medical relief, preservation of environment/ monuments ,
advancement of objects of general public utility, religious purpose, etc. There
taxation has always been a point of concern. The entire income of such trust(be
it house property, capital gain or any other income) is taxed as per the
provisions of section 11-13 of the Income Tax Act ,1961 rather than as per
there relevant provisions . Here I have discussed the major areas related to
taxation of income of such charitable/religious trusts.
Income
of charitable/religious trust can be classified as follows:-
I. Voluntary Contributions(donations) Section 11(1)
Voluntary
contributions are basically the donations received by the charitable/religious
trust which form part of income of the trust.
They
are of two types:
1)
Donations received with specific direction that they shall form part of corpus
fund
Such
donations are exempt
2)
Donations received without such specific instruction
Such
donations shall form part of income from trust property
II. Income From Property held under trust for charitable and
religious purposes
Particulars
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Taxability
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15%
OF GROSS RECEIPTS FROM SUCH TRUST PROPERTY
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EXEMPT
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85%
OF GROSS RECEIPT FROM SUCH TRUST PROPERTY
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i.
Income Applied For charitable Purposes in INDIA
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EXEMPT
(Sec11(1))to the extent to which applied for the following purposes:
1. Purchase of capital asset
2. Repayment of loan for
purchase of capital asset
3. Revenue Expenditure
4. Donation to trust registered u/s
12AA or u/s 10(23C)
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Income
DEEMED TO BE APPLIED FOR CHARITABLE
PURPOSE
IN INDIA:
IN CASE WHOLE OR PART OF INCOME IS NOT RECEIVED DURING
THAT YEAR IN WHICH IT IS DERIVED
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-Exempt
in case :
a. Income is applied for charitable purpose in India in
the year of receipt or in the immediate succeeding year.
b. Assessee submits a declaration to the Assessing Officer
on or before the due date of filling of return as per section 139(1) that
such income shall be applied for such purpose in the year of receipt or
succeeding year.
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IN
ANY OTHER CASE
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-Exempt
in case :
a. Such income is applied in abovementioned charitable
purposes in the immediately succeeding year.
b. Assessee submits a declaration to the Assessing Officer
on or before the due date of filling of return as per section 139(1) that
such income shall be applied for such purpose in the immediate succeeding
year.
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II.
INCOME NOT APPLIED FOR CHARITABLE/RELIGIOUS PURPOSE IN INDIA
Q) What are the modes in which income shall be
accumulated for specific purpose (sec 11(5))??
A) 1. Investment in government saving certificate/UTI
2. Deposit in post office savings bank/scheduled bank.
3. Investment in immovable property.
4. Deposit with or investment in bonds of a public co.
having main object of providing long term finance
for urban infrastructure/industrial development/
residential house, in India
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A) ASSESSEE GIVES NOTICE TO
Assessing officer specifying purpose and period
(cannot exceed 5 years) of accumulation before assessment is complete.
B) Accumulated amount is
deposited /invested in specified form.
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Not
accumulated for specific purpose in India
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Taxable
in case income is not applied for charitable/religious purpose in India and
is also not accumulated for specific purpose in India.
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III. CAPITAL GAINS (Sec 11(1A)
The
capital gain arising from the transfer of a property held by
religious/charitable trust shall be taxable as under:
1) Cost of new asset ≥ net
consideration from asset sold → Entire capital gain is
exempt
2) Cost of new asset < net consideration
from asset sold → Capital Gains Exempt = Cost of new asset less
Cost of old asset
IV.
Anonymous Donations (Sec 115BBC)
Q)
What are anonymous donations??
A)
Anonymous donations are basically the donations where the person receiving the
donations doesn’t maintain any record of the person giving the donation. E.g. –
Offerings given in temple in donation box.
Taxability
Step
1: Compute the total amount of anonymous donation received by the
charitable/religious institution
Step
2 : Compute 5% of the total donations(corpus donations + anonymous donations +
other donations not forming part of corpus)
Step
3 : Select the higher of the following two:
a)
Amount computed in step 2 or
b)
1,00,000
The
amount computed in step 3 shall be exempt and the remaining amounts of
anonymous donations are taxable in the hands of such charitable/religious institution
@ flat 30% (115BBC)
Cases where anonymous donations shall not be taxable u/s
115BBC
1)
Where donations are received by trust established WHOLLY for RELIGIOUS purpose
(no charitable purpose). E.g.-donations given by devotees to trust owning a temple.
2)
However in case such religious/charitable trust also runs a school/medical
institution/educational institution ,etc and the donations are received with
specific direction that they are for such school/institution then such
donations shall be taxable
Anonymous
donations not taxable u/s 115BBC → taxable as per section 11 & 12
Anonymous donations taxable u/s 115BBC → not exempted u/s 11 & 12
Section 13: Section 11 not to apply in certain cases:
1.
Entire income from the property held under a trust for private religious
purposes which does not enure for the benefit of the public.
2.
Entire income of a charitable trust or institution created or established for
the benefit of any particular religious community or caste.
3.
Entire income of the following charitable/religious trust:-
a) where any part of the income of such trust is used for the benefit of any
person specified under sec13(3) or
b) Where any property of the trust id used for the benefit of any person specified
under sec13(3)
4.
Entire income of a charitable /religious trust whose funds are not invested in
modes specified under section 11(5).
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