Amendments Effective From 1st April, 2024 For Charitable Trusts

The landscape for Charitable Trusts has undergone significant changes effective from April 1, 2024. These amendments, particularly in Section 11 of the Income Tax Act, 1961, bring about crucial alterations in deduction policies, corpus donations, and audit report submissions. Understanding these changes is essential for trustees to navigate the new regulations effectively.

So far as Charitable Trusts are concerned, please remember the amendments made in Budget, 2023. There are certain amendments which make the trustees to be care full. We all know that new financial year has already started from 1^st April, 2024.

There is major amendment in Section 11 of the Income Tax Act, 1961 with effect from Financial Year 2023-24 and Assessment Year 2024-25.

Till 31^st March, 2023, one trust can give donation to other trust whose objects are the same and get full deduction. As per the amendment, after 1^st April, 2023 any trust give donation to other trust, donor trust will get deduction of percentage. That means remaining 15 percentage will be liable to tax @ 30 percent. To understand this take an example.

Trust ‘A’ has given donation of Rs. 50,00,000 from the current years income of Rs. 80,00,000 and spent Rs. 20,00,000 for the object of the trust, hence taxable income will be Rs. 10,00,000. But as per section 11(1)(a)/(b) 85 percent of its income derived from the property held under trust or institutions wholly for charitable or religious purposes is exempt, if it is applied to such purposes in India. Calculation will be as under:

If trust pass a resolution that Rs. 5,50,000 will be spent for specific purpose within 5 years and file Form No 10, trust is not liable to pay any tax.

Please remember that gross total income includes income received during the year which includes, interest, dividends, rent, voluntary contribution etc. Trust cannot give donation to other trust from the Corpus Fund of the trust.

So far as the corpus donation is concern, one trust cannot give corpus donation to other trust, if given by one trust donor trust will not get deduction. The reason is that when one trust transfer amount to corpus, it has not paid tax on that amount and now give donation for corpus, again they will not get deduction. Section 11 of the Act is very much clear that if one trust give corpus donation to other trust, donor trust will not get deduction.

For example, if one trust give corpus donation of Rs. 5,00,000 to other trust, out of regular income of Rs. 20,00,000 then donor trust will not get deduction of Rs. 5,00,000 because recipient trust will not show Rs. 5,00,000 as income, as it is for the corpus. If donor trust give voluntary donation to other trust, donor trust will deduction Rs. 5,00,000 minus 15% i.e. 75,000.

We know that since last year new audit report in Form No 10B and 10BB is to be submitted. Due to this reason the date for submitting audit report was extended to 31^st October, 2023 and date of filling return of income to 30^th November, 2023. As this audit report in Form No 10B and Form No 10BB was lengthy, many trust have made mistakes. Those who required to file Form No 10B have submitted Form No 10BB. But Central Board of Direct Taxes have issued notification that those trusts have not proper Form 10B 0r 10BB can submit, correct report before 31^st March, 2024

Trust have spent 85% and saved 15% of total income, which is to be deposited in securities mention in section 11(5). When donor trust have given donation of Rs. 100 to another trust, so donor trust will get deduction of Rs.85. The question arise is that when there is no saving of 15%, what amount is to be deposited? In fact Rs. 100 given as donation, so there is no saving of Rs. 15, hence invest it as per section 11(5) does not arise.

All the trust assesses are requested to be careful.