The Finance Act 2021 and the Finance Act 2022 have made some critical amendments to the conditions to be followed by registered charitable & religious Trust to avail the exemption under section 11 of Income Tax Act, 1961.
Criteria for Exemption to registered charitable & religious Trust under section 11 of Income Tax Act, 1961 has been produced here in a tabular form.
Criteria for Exemption to registered charitable & religious Trust under section 11 of Income Tax Act, 1961
| S.N. | Particulars | Conditions for Exemption |
| 1 | Depreciation Sec 11(6) | Not allowable if the capital asset is fully claimed as application of money. |
| 2 | Expenses out of loan. Sec 11(1) Explanation 4(ii)
|
Expenses incurred out of loan, not allowed as application. But when this loan is repaid, it will be allowed as application in the year of repayment. (Finance Act, 2021). |
| 3 | Expense out of corpus
Sec 11(1) Explanation 4(i) |
Expenditure out of corpus not allowed as application. But when this amount is invested back in the specified investment (11(5)), it will be allowed as application in the year in which it is invested back. (Finance Act, 2021). |
| 4 | Set off of carried forwarded Deficit. Sec 11(1) Explanation- 5 | The set-off of past deficit against the current year’s income is not allowed and it will not be considered in calculating 85% expenditure. (Finance Act, 2021). This is called only paper deficit. |
| 5 | Application of expenses allowed only on Payment Basis and not on accrual basis. Sec 11(7) Explanation. | The expenses will be allowed only when in the year of its actual payment , whatever may be method of accounting regularly employed by the Trust.
(Finance Act, 2022). |
| 6 | Expenses paid without TDS. Sec 11(1) Explanation- 3 | 30% of the expenditure will be disallowed. |
| 7 | Inter charity Donation (Sec 11(1) Explanation-2 | Donation made to other registered trust out of the Corpus is not allowed as application( A.Y. 2018-19). Finance Act, 2020 |
| 8 | Accumulation u/s 11(2) | The period of expenditure out of accumulated funds u/s 11(2) has been reduced from 6 years to 5 years. For accumulation file Form No. 10 |
| 9 | Accumulation of 15% Permitted u/s 11(1)(a) | without any restriction on the period during which it has to be used. |
| 10 | Donation received towards Corpus Sec 11(1)(d) | Exempt u/s 11(1)(d) provided it is invested or deposited in one or more of the forms or modes specified in Section 11(5) maintained specifically for such corpus. Finance Act, 2021. |
| 11 | Payment exceeding Rs. 10000/- made in cash. Sec 11(1) Explanation 3 | Not allowed as deduction. |
| 12 | Capital Gains Sec 11(1A) | Will be exempt only if capital gain is utilised for acquiring another capital asset. |
| 13 | When accrued income is not received in the same year i.e. fuds are not received. Sec11(1) Explanation-2 | (a) If the funds are not received at all during the same year then exemption will be granted if the same is spent in the year in which it is received or in the following year.
(b) If the funds could not be spent in the same year for any other reason then exemption will be granted if spent during the following year. (File Form No 9A) |
| 14 | Audit report not filed before upto 30th September 22 Sec 12A (b)(ii) | Exemption u/s 11 will be fully disallowed.
Form No 10B |
| 15 | Return not filed upto 31st October 22. (Sec12A(1) Sec12A (ba) (i) | Exemption u/s 11 will be fully disallowed. Income-tax return must be furnished as per the provisions of sub-section (4A) of section 139, within the time allowed under that section. |
| 16 | Filing of Forms | a) All forms or certificates to be filed by a Chartered Accountant like Form 10B, must be filed upto 30-09-22.
b) All forms or certificates to be filed by the like Form 10, 9A etc. are required to be filed upto time allowed u/s 139(1) i.e. 31st October 22. |
| Note: Errors & Omissions are excepted. | ||
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