Charitable Trust Whether Voluntary Contribution with Specific Directions is Considered as Income of the Unregistered Trust?

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The Tax Publishers Income Tax--Charitable Trust Whether Voluntary Contribution with Specific Directions is Considered as Income of the Unregistered Trust? Tejaswini Bobde In case of registered trust corpus donations are exempt because of Section 11(1)(d). The learned author examines taxability of such donations in case of unregistered trust with the help of some decided cases. 1. Introduction The income of the registered trust engaged in the activity of charitable/religious purposes is separately dealt under Section 11 and 12 of the Income Tax Act, 1961 (hereinafter to be referred as 'Act'). While in case of unregistered trust, the income is taxable as per normal provisions of the Act. The word charitable is defined under Section 2(15) of the Act wherein it states that 'charitable purpose' includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility'. Further, the word 'Religious' is not defined under the Act thus, the meaning of the same shall be taken in general parlance. As per Section 11 of the Act, all the receipts (whether in nature of capital/revenue) derived from property held under trust shall be treated as income of the trust restricting amount received towards corpus fund. Out of the income of the trust, the trust will get the exemptions of followings: -- Amount accumulated and set apart for application to the extent 15 percent of total receipts. -- Out of remaining 85%, the amount actually been applied towards object of the trust. The amount received towards corpus fund shall not be treated income of the trust by virtue of provisions of the Section 11(1)(d) of the Act if conditions specified therein are satisfied. Section 2(24) of the Act defines the term 'income'. It has been mentioned in clause (iia) therein that 'income includes voluntary contribution received by religious/charitable trust'. Thus, the voluntary contribution is considered as income of the Trust. However, Section 11(1)(d) specifically states that the income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution and the same shall not be included in total income of the trust. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax--Charitable Trust

Whether Voluntary Contribution with Specific Directions is Considered as Income of the Unregistered Trust?

Tejaswini Bobde

In case of registered trust corpus donations are exempt because of Section 11(1)(d). The learned author examines taxability of such donations in case of unregistered trust with the help of some decided cases.

1. Introduction

The income of the registered trust engaged in the activity of charitable/religious purposes is separately dealt under Section 11 and 12 of the Income Tax Act, 1961 (hereinafter to be referred as 'Act'). While in case of unregistered trust, the income is taxable as per normal provisions of the Act.

The word charitable is defined under Section 2(15) of the Act wherein it states that 'charitable purpose' includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility'. Further, the word 'Religious' is not defined under the Act thus, the meaning of the same shall be taken in general parlance.

As per Section 11 of the Act, all the receipts (whether in nature of capital/revenue) derived from property held under trust shall be treated as income of the trust restricting amount received towards corpus fund. Out of the income of the trust, the trust will get the exemptions of followings:

-- Amount accumulated and set apart for application to the extent 15 percent of total receipts.

-- Out of remaining 85%, the amount actually been applied towards object of the trust.

The amount received towards corpus fund shall not be treated income of the trust by virtue of provisions of the Section 11(1)(d) of the Act if conditions specified therein are satisfied.

Section 2(24) of the Act defines the term 'income'. It has been mentioned in clause (iia) therein that 'income includes voluntary contribution received by religious/charitable trust'. Thus, the voluntary contribution is considered as income of the Trust.

However, Section 11(1)(d) specifically states that the income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution and the same shall not be included in total income of the trust.