Income Tax Department

​As per Section 115TD, a trust or institution is liable to pay additional income-tax on the accreted income, which arises on conversion of a trust into non-charitable form or on transfer of assets of a charitable trust on its dissolution to a non-charitable institution. The tax on accreted income shall be levied at maximum marginal tax rate and this tax is in addition to income-tax chargeable in hands of trust or institution.

The accreted income is the fair market value (FMV) of the total assets of trust as reduced by the total liability as on the specified date.​

​If income applied during the previous year for charitable or religious purpose in India falls short of 85%, the unspent amount is still deemed to be applied for charitable or religious purposes in India if the trust submits a declaration to the Assessing Officer and invest the surplus amount in the modes specified under section 11(5). This setting aside or retaining a part of the income earned by the trust is called accumulation of income.​

​Anonymous Donation means any voluntary contribution where the person receiving such contribution does not maintain a record of the identity of the donor indicating his name, address, and such other particulars as may be prescribed.​

​The application of income includes all payments and expenditures for the purpose of charitable and religious purposes in India. Exemption under Section 11 is available to a trust with respect to the income applied for charitable or religious purposes in India. If the income is applied for purposes other than religious or charitable purposes, it shall be taxable under Section 115BBI.​

Section 2(15) of the Income-tax Act provides an inclusive definition of 'charitable purpose'. It includes the following:

a) Relief of Poor;

b) Education;

c) Yoga;

d) Medical Relief;

e) Preservation of the environment (including watersheds, forests, and wildlife);

f) Preservation of monuments or places or objects of artistic or historic interest; and

g) Advancement of any other object of general public utility.

​Corpus donation means any voluntary contributions received by a trust or an institution, created wholly for charitable or religious purposes, with a specified direction that they shall form part of the corpus of the trust or institution.​

Section 13 of the Income-tax Act restricts exemption to a charitable or religious trust to the extent of the income applied for the benefit of an interested person. The following persons are categorised as 'interested person':

a) The author of the trust or the founder of the institution;

b) Any person who has made a total contribution up to the end of the relevant previous year of an amount exceeding Rs. 50,000;

c) Where the author, founder, or substantial contributor is a HUF, a member of the HUF;

d) Any trustee of the trust or manager of the institution;

e) Any relative of such author, founder, substantial contributor, member, trustee, or manager as aforesaid; and

f) Any concern in which any of the persons referred to above has a substantial interest.

​"Permissible mode" refers to the ways in which a charitable or religious trust can utilize its income without losing its tax-exempt status. The permissible mode has been specified under section 11 of the Income-tax Act​

​​Public charitable trusts is a trust whose beneficiaries are the public at large.

For the purpose of section 13, relative in relation to an individual means:

(a) Spouse of the individual;

(b) Brother or sister (and their spouses) of the individual;

(c) Brother or sister (and their spouses) of the spouse of the individual;

(d) Any lineal ascendant or descendant (and their spouses) of the individual;

(e) Any lineal ascendant or descendant (and their spouses) of the spouse of the individual;

(f) Any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.

Section 8 companies are registered under the Company Act, 2013. These companies are formed for a charitable purpose.

Section 12AB defines the meaning of 'Specified Violation' which is as follows:

a) Application of income other than for the objects;

b) Income from business not incidental to the objects;

c) Separate books not maintained for business incidental to the objects;

d) Application of income not for benefit of the public;

e) Application of income for the private religious community;

f) Activities of trust are not genuine; and

g) Non-compliance with requirements of other law.

For the purpose of section 13, a person is deemed to have a substantial interest in concern if he (or along with 'interested persons' as mentioned above) at any time during the previous year:

(a) Holds at least 20% of equity share capital, in case of a company; or

(b) Entitled to at least 20% of profits in the case of any other concern.