As we all are aware of Section 11 and Section 12 of Income Tax Act, 1961 are dealing with taxation of Charitable and religious trusts. There were some amendments also which have been taken place in last 2 years. Those amendments have far reaching impact on the taxation of Charitable and religious trusts. In this Article we have discussed five major points which are affecting Charitable and religious trusts.

1. Corpus donations shall not be considered as an application of income in case of Charitable Trust

Any contribution by a charitable or religious trust or institution to any other trust or institution registered u/s 12AA, with a specific direction that it shall form part of corpus of recipient trust/institution shall not be treated as application of income u/s 11 for the donor trust/institution.

It means that corpus donations shall not be considered as an application of income.

2. Modification in objects mentioned at the time of registration of Charitable firm:

It means where a trust or an institution has been granted registration and subsequently it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, it shall be required to obtain fresh registration by making an application within a period of thirty days from the date of such adoption or modifications of the objects in the prescribed form and manner.

 3. Filing of Return of Income as per Section 139(4A):

Section 12A has been amended so as to provide for further condition that the person in receipt of income chargeable to income-tax shall furnish the return of income within the time specified u/s 139(4A) of the Income Tax Act.

4. Receipt of money or property by any person for inadequate or without consideration u/s 56(2)(X):

In order to prevent practice of the Charitable or Private Trusts of receiving money or property for inadequate consideration or without consideration, Finance Act 2017 introduced clause (x) in section 56(2). With the insertion of this section the money or the property received by any person for inadequate consideration or without consideration in excess of Rs. 50,000 shall be liable to income-tax under the head “Income from other sources” in the hands of the recipient.

Consequently, now if any property is being received by the charitable trust or by any private trust for inadequate consideration or without consideration in excess of Rs. 50,000 then it will chargeable to income-tax under the head “Income from other sources” under section 56(2)(x) in the hands of the recipient trust.

However, this newly inserted clause(x) in section 56 shall not apply to any sum of money or any property received:

1) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10.

2) from or by any trust or institution registered under section 12A or section 12AA.

3) by any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10.

4) from an individual by a trust created or established solely for the benefit of relative of the individual.

Thus, it is important to note that above mentioned trusts and institutions are out of the ambit of Section 56(2)(x). The trusts registered u/s 12A and specified institutions registered u/s 10(23C) are excluded from this clause so that Donations received by these trusts are not get taxed.

5) Restriction on Cash Donations u/s 80G:

Finance Act 2017 amended section 80G so as to provide that no deduction shall be allowed under the section 80G in respect of donation of any sum exceeding Rs. 2,000/- unless such sum is paid by any mode other than cash. Earlier this limit was Rs. 10,000/-. The Government has taken this step in order to provide cash less economy and transparency.

(Submitted by – Tarun Kumar (B.Com, ACA) Mobile: +91-888-282-8112- Email-ID: catarunkumar92@gmail.com)

(Republished with Amendments)

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16 Comments

  1. USAMA says:

    in charity commissioner website trust a/c income side donation and schedule 9c Donations Received From Other Public Trust And Dharmadas this tow types of donation same or note , please reply

  2. John says:

    Sir, Suppose our trust receives a foreign fund through FCRA. Can we transfer/donate a portion of the amount to some other trust, which has 12A and 80 G?
    Please clarify.

  3. Kaleem says:

    Dear sir,

    I have a trust registered in 2013 in Karnataka. I would like to take over a school from another trust which is running the institution since 2008.

    Can you guide us about the procedure to transfer the school from one trust to another trust.
    Please help us.
    9739118667.

  4. Manish says:

    Hello Sir, Need your opinion on below points:
    * Can we create a trust from society with passing a resolution and change land ownership to new trust .
    * Can one trust give a huge amount to other trust to purchase a property.

  5. Rajendra Shah says:

    Dear Taurn Sir
    A charitable trust running a school receives donations in cash from various members of Society. What is the limit of unrecognised donations in cash and when amendment of the same is made and from which date this amendment applicable.

  6. Rajendra Shah says:

    A charitable trust running a school receives donations in cash from various members of Society. What is the limit of unrecognised donations in cash and when amendment of the same is made and from which date this amendment applicable.

  7. Mahesh P says:

    Dear Tarun sir,

    Can you please carify me whether Trust can pay donation of more than Rs.2000 in cash, will this be considered as application of Income?

    Regards
    Mahesh P
    Article student.

  8. Balvinder Singh says:

    Sir Tarun,
    I m working with one NGO having 80g certificate. We mostly receive cash as corpus more than 2000.
    If we receive rs10000 in cash can we issue a receipt of rs 10000 or issue 5 receipt of rs 2000 each.

  9. S. Balasubramanian says:

    Sir,
    Please clarify whether the amount exceeding Rs. 2000 in cash can be received as donation by a charitable institution or not.

    My type of understanding is “An NGO having 12AA exemption certificate whose donations received are available for deductions u/s 80G can receive donations exceeding Rs. 2000 in cash but the claimant of the same cannot claim the donation u/s 80G. Is this understanding and interpretation correct? Please clarify.

    Also, please mention the effective date of the above provision.

    Thank you for a wonderful article.

    S. Balasubramanian
    CA Student

    1. Tarun Kumar says:

      Dear S. Balasubramanian,

      Section 80G provides deduction while computing the total income in the hands of donor. No deduction u/s 80G shall be allowed if any sum exceeding Rs. 2000/- is paid in cash by donor.

      This amendment was made vide Finance Act’2017 and applicable w.e.f. 01-04-2018 i.e. A.Y 2018-19.

      1. S. Balasubramanian says:

        Dear Tarun Kumar,

        First of all, thank you for the wonderful reply to my question. I could deeply understand your points. But, another question rises from my mind that: From the Trust’s point of view, can it receive donation from one donor above Rs. 2000 ?

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