Finance Bill, 2023Charitable Trust Application of Income by Charitable Trusts and Exempt InstitutionsCertain Clarifications and Amendments by Finance Bill, 2023

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The Tax Publishers Finance Bill, 2023--Charitable Trust Application of Income by Charitable Trusts and Exempt Institutions--Certain Clarifications and Amendments by Finance Bill, 2023 CA. Nisha Bhandari The Finance Bill 2023, proposes a lot of amendments relating to charitable trusts and institutions claiming exemption under Section 10(23C) and under Section 11.The present write up aims at highlighting certain amendments in relation to application of income by these trusts and institutions. 1. Application of income--One of the condition precedent for claiming exemption under Section 11 and under Section 10(23C)(iv)/(v)/(vi)/(via) In order to avail of the exemption, the income of a wholly or partly (as the case may be) charitable or religious trust should be applied for charitable or religious purposes in India and the exemption is available to the extent of such application. The application of income should be to the extent of 85 per cent because if the income is to be accumulated or set apart for such purposes, the accumulation should not exceed 15 per cent of such income according to Section 11(1)(a)/(b). Similar requirement is also there under the third proviso to Section 10(23C) in respect of institution claiming exemption under Section 10(23C)(iv)/(v)/(vi)/(via) known as first regime. 2. Corpus donation vis-a-vis application of income (i) Corpus donation to any other trust not to be treated as application of income Explanation 2 to Section 11(1), provides that any amount credited or paid, out of income referred to in clause (a) or clause (b) read with Explanation 1, to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clauses (iv)/(v)/(vi)/(via) of Section 10(23C) or other trust or institution registered under Section 12AA or Section 12AB, as the case may be, being contribution with a specific direction that it shall form part of the corpus, shall not be treated as application of income for charitable or religious purposes. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Finance Bill, 2023--Charitable Trust

Application of Income by Charitable Trusts and Exempt Institutions--Certain Clarifications and Amendments by Finance Bill, 2023

CA. Nisha Bhandari

The Finance Bill 2023, proposes a lot of amendments relating to charitable trusts and institutions claiming exemption under Section 10(23C) and under Section 11.The present write up aims at highlighting certain amendments in relation to application of income by these trusts and institutions.

1. Application of income--One of the condition precedent for claiming exemption under Section 11 and under Section 10(23C)(iv)/(v)/(vi)/(via)

In order to avail of the exemption, the income of a wholly or partly (as the case may be) charitable or religious trust should be applied for charitable or religious purposes in India and the exemption is available to the extent of such application. The application of income should be to the extent of 85 per cent because if the income is to be accumulated or set apart for such purposes, the accumulation should not exceed 15 per cent of such income according to Section 11(1)(a)/(b).

Similar requirement is also there under the third proviso to Section 10(23C) in respect of institution claiming exemption under Section 10(23C)(iv)/(v)/(vi)/(via) known as first regime.

2. Corpus donation vis-a-vis application of income

(i) Corpus donation to any other trust not to be treated as application of income

Explanation 2 to Section 11(1), provides that any amount credited or paid, out of income referred to in clause (a) or clause (b) read with Explanation 1, to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clauses (iv)/(v)/(vi)/(via) of Section 10(23C) or other trust or institution registered under Section 12AA or Section 12AB, as the case may be, being contribution with a specific direction that it shall form part of the corpus, shall not be treated as application of income for charitable or religious purposes.