BASICS : > The Trust must be registered u/s 12AA ;
> the propety must be held under a trust or other legal obligatins ;
> the property should be held for charitable purposes ;
> the trust should not be created for the benefit of a particular religious community or cast ;
> no part of the income should be kept for the settlor or specified persons ;
> where the TI w/o u/s 11 & 12 exceed the basic limit, an audit must be conducted thereof ;
> at least 85% of the income should be applied for achien=ving the objects of the trust ;
> 15% of the income whoch can be set apart must preferebly be deposited u/s 11(5).
11(1) Income from property held for C/R purposes :
The following shall not be included in the TI :
Nature of income Extent of exemption
11(1)(a) from property held for C/R purposes To the extent applied for the objects [note 1] and where the same is accumulated then
15% of such income.
11(1)(b) Corpus Donation [i.e with a specific direction ] 100%
1. Govt saving Certificates 2. Post office Saving Bank 3. Units of the UTI
4. Scheduled Bank/Coope society/Bank 5. any security issued by the CG/SG 6. Debentures of a CO./Corp. unconditiionally guaranteed by the CG/SG
7. Deposit with/inv in bonds by a Fin Corp 36(1)(viii) 8.Immovable property (ecept any P/M )
9.Dep/Inv in a Pub co.carrying on the bus of providing LTF for const or pur of houses in india for residential purposes
10.Dep/Inv in a Pub co.carrying on the bus of providing LTF for urban infra in india
11.Deposit with IDBI 12.Inv in MFs [10(23D)] or shares of a Depository 13.Inv in shares of any PSC
12A Conditions for applicability if sec 11&12
1.Application is made u/s 12AA to the CIT ;
theprov shall apply from the AY just following the FY in which appl is made.
2.Where w/o 11 & 12, income exceeds 2L, must audited.
12AA Procedure for registration
1.CIT may call for any info to ensure the genuineness of the objects or act of the trust
2.Every order of acceptance or rjection shall be passed within 6m from the end of the month in which app made.
Income not exempted u/s 11 : [in case of 13(1)(a) to (d), the entire incopme shall be chargeable to tax at the MAXIMUM MARGINAL RATE ]
13(1)(a) Property held under a private trust
13(1)(b) Any income of trust created for the benefit of a particular cast or community except those for Sheduked/tribal/backword class, women or children etc.
13(1)(c) Any income applied for the benefit of specified persons u/s 13(3).
13(1)(d) Funds not invested u/s 11(5)
13(7) Anonymous Donation on which tax is payable u/s 115BBC.
11(4A) Bus not incidental to the objects or for which separate BOA have not been kept.
12(2) Educational and medical facilities to any specified person except u/s 13(3)(e).
13(2) Income for the benefit of a Specified Person
13(2)(a) Lending income or any property to a person referred to in sec 13(3) w/o adequate security or interest or both ;
13(2)(b) Letting L/B/other property to person u/s 13(3) w/o adequate rent or compensation ;
13(2)(c) Unreasonable salary ,allowance etc to person u/s 13(3) ;
13(2)(d) Service of the trust made available to person u/s 13(3) w/o remuneration or compensation ;
13(2)(e) Buyin shares or sec by or on behalf of trust from person u/s 13(3) for more than adequate consideration ;
13(2)(f) Selling share or sec by or on behalf of trust to person 13(3) for less than adequate consideration ;
13(2)(g) Income diverted in favour of above person [upto 1000/- not applicable ] ;
13(2)(h) Funds kept invested in a concern in which the above person has SI .
CLICK HERE AND GET IN EXCEL FORMAT
13(3) Meaning of Specified Person
a. The Author of the Trust or the founder of the Institution ;
b. any person who has made a contribution of an amount exceeding 50000/- during the PY ;
c. Where any of the 1 or 2 is an HUF, then a member of HUF ;
cc.any trustee of the trust or manager of the institution ;
d. any relative of any of the above in a to cc ; and
e. any concern in whichany of the persons referred above has SI.
2(15) Charitable purpose
1. RELIEF OF POOR ;
2. EDUCATION ;
3. MEDICAL RELIEF ;
4. PRESERVATION OF ENVIRONMENT (including watersheds, forests and wildlife ) ;
5. PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST ; AND
6. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY .
If the object of the trust is 1 to 5 above :
then if it charges any fee or income on commercial basis and it exceeds 25L then also the entire income including such commercial income shall be eligible for exemption ;
if trust carries on a bus incidental to attainments of main objects and separate BOA are kept then also the Buz income and the charitable income is exempt ;
If the buz is not incidental to main object then any receipt from such buz is not eligible for exemption but it doesn’t affect the status of the trust and its Charitable income stands intact
If the object is 6 as above : [1st and 2nd proviso to sec 2(15) ]
If trust charges for above on commercial basis then – Max 25L allowed ;if not it loses the status of a trust.
If Charges on comm.basis and also carries on incidental buz then – Composit income should not exceed 25L ;if exceeds it ceases to be trust ;
If Comm basis and buz not incidental and composit income doesn’t exceed 25L then only former income is exempt and trust status remains same;
If not on comm income but incidental then should not exceed 25L and general and bus income is exempt ; if exceeds 25L then ceases to be trust ;
If not comm not incidental and doesn’t exceed 25L then remains as trust but buz income is not exempt ; if exceeds 25 l then ceases to be a trust .
In short any income exceeds 25L it shall no longer remain a trust .
13(8) A CHARITABLE TRUST OR INSTITUTION PURSUING ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY MAY BE A CHARITABLE TRUST IN ONE YEAR AND NOT IN ANOTHER DEPENDING
ON THE VALUE OF RECEIPT FROM COMMERCIAL ACTIVITIES .
THEREFOR THE CIT NEED NOT CANCEL THE RGISTRATION F EXCEEDS 25L AND TO GRANT AGAIN IN A YEAR IN WHICH DOESN’T EXCEED 25L.HE HAS TO SEE TH OPERATION OF LAW ONLY.
115BBC ANONYMOUS DONATION
1. TAXABLE @ 30%
2. Any voluntary contribution where a person receivng such contribution doesn’t maintain a record of the identity of the donor.
3. Higher of the following shall not be taxable under this section i.e :
a. 5% of the Total Donation ; or
b. 1,00,000 /- Rest of the AD shall be taxed at 30%.
4. Trust wholly for Religious purpose (e.g a temple ) – AD not taxable but subject to sec 11& 12 that means such AD also are normal income taxble.
5 .Trust wholly Charitable – AD taxable u/s 115BBC and not eligible for exemption u/s 11 & 12.
6. Wholly Religious & Charitable Purposes – not taxable u/s 115BBC but if made with direction that its for any uni/educ inst/medical inst//hospital run by such trust then taxable.