The Finance Bill, 2025, proposes amendments to Section 13(3) of the Income-tax Act, which specifies conditions under which trusts and institutions lose tax exemptions under Sections 11 and 12 if their income benefits certain persons. Currently, a person contributing over ₹50,000 is considered a specified person, along with their relatives and any concern in which they hold a substantial interest. The amendment increases the contribution threshold to ₹1 lakh in a financial year or ₹10 lakh cumulatively. Additionally, relatives of such contributors and concerns in which they have substantial interest will no longer be considered specified persons. These amendments aim to simplify compliance requirements and will take effect from April 1, 2025.
Budget 2025: Rationalisation of persons specified under sub-section (3) of section 13 for trusts or institutions
Section 13 of the Act, inter alia, provides that section 11 or section 12 shall not apply to exclude any income from the total income of trust of institution, if such income enures, or such income or any property of the trust or the institution is used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3), which inter alia are as following –
- any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees;
- any relative of any such person as aforesaid;
- any concern in which any such person as aforesaid has a substantial interest.
2. Suggestions have been received that there are difficulties in furnishing certain details of persons other than author, founder, trustees or manager etc. who have made a ‘substantial contribution to the trust or institution’, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees. These details are about their relatives and the concerns, in which they are substantially interested.
3. It is, therefore, proposed to amend the sub-section (3) of section 13 to provide that,–
(i) persons referred to in clause (b) of sub-section (3) of section 13, shall be any person whose total contribution to the trust or institution, during the relevant previous year exceeds one lakh rupees, or, in aggregate up to the end of the relevant previous year exceeds ten lakh rupees, as the case may be;
(ii) relative of any such person as mentioned in (i) above, shall not be included in persons specified in sub-section (3) of section 13; and
(iii) any concern in which any such person as mentioned in (i) above has a substantial interest, shall not be included in persons specified in sub-section (3) of section 13.
4. These amendments will take effect from the 1st day of April, 2025.
[Clause 8]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 8 of the Bill seeks to amend section 13 of the Income-tax Act relating to section 11 not to apply in certain cases.
Sub-section (3) of section 13 specifies as to the persons referred to in clause (c) of subsection (1) and sub-section (2) of the said section.
It is proposed to amend clause (b) of the said sub-section so as to provide that specified person would be any person whose total contribution to the trust or institution, during the relevant previous year exceeds one lakh rupees, or, in aggregate up to the end of the relevant previous year exceeds ten lakh rupees, as the case may be.
It is further proposed to amend clause (d) of the said sub-section so as to provide that any relative of person referred to in clause (b) shall not be treated as specified person for the purposes of the said sub-section.
It is also proposed to amend clause (e) of the said sub-section so as to provide that any concern in which the person referred to in clause (b) has substantial interest shall not be treated as specified person for the purposes of the said sub-section.
These amendments will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
8. Amendment of section 13.
In section 13 of the Income-tax Act, in sub-section (3),
(a) for clause (b), the following clause shall be substituted, namely:––
“(b) any person whose total contribution to the trust or institution, during the relevant previous year exceeds one lakh rupees, or, in aggregate up to the end of the relevant previous year exceeds ten lakh rupees, as the case may be;”;
(i) in clause (d), the word “person,” shall be omitted;
(ii) in clause (e), the brackets and letter “(b),” shall be omitted.
