Section 11(5) of the Income Tax Act is a provision that deals with the tax treatment of income derived from properties held for charitable or religious purposes. The section lays down conditions and restrictions that must be satisfied for such income to qualify for exemption from income tax.
Conditions for Exemption
For income derived from properties held for charitable or religious purposes to qualify for exemption from income tax, certain conditions must be satisfied. These conditions are as follows:
The property must be held for charitable or religious purposes
The income derived from the property must be used solely for charitable or religious purposes. The property must not be used for any commercial purposes or the benefit of any individual. These conditions are designed to ensure that income derived from properties held for charitable or religious purposes is used solely for such purposes and not for any other purposes.
Restrictions on the Use of Income
In addition to the conditions listed above, Section 11(5) also imposes certain restrictions on the use of income derived from properties held for charitable or religious purposes. These restrictions are as follows:
The income cannot be used for any purpose outside India
The income cannot be used for any purpose that is not by the objects of the trust or institution. The income cannot be used for any purpose that involves the carrying on of any activity like trade, commerce, or business.
The income cannot be used for any purpose that involves the rendering of any services about any trade, commerce, or business. These restrictions are intended to ensure that income derived from properties held for charitable or religious purposes is used only for purposes that are consistent with the charitable or religious objectives of the trust or institution.
Consequences of Non-Compliance
If any income derived from properties held for charitable or religious purposes is used for purposes other than charitable or religious purposes, then it shall be taxable under the Income Tax Act. Further, if any of the conditions or restrictions listed above are not satisfied, then the income derived from such properties may also be taxable.
Final Conclusion
Section 11(5) of the Income Tax Act is an important provision that provides for tax exemption for income derived from properties held for charitable or religious purposes, subject to certain conditions and restrictions. It is important for trusts and institutions engaged in charitable or religious activities to understand the provisions of this section and ensure compliance with its requirements to avail of the tax benefits provided under the Income Tax Act. Failure to comply with the conditions and restrictions listed in Section 11(5) can result in the income derived from such properties becoming taxable.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Here are some frequently asked questions (FAQs) about Section 11(5) of the Income Tax Act:
Q: What is Section 11(5) of the Income Tax Act?
A: Section 11(5) of the Income Tax Act is a provision that deals with the tax treatment of income derived from properties held for charitable or religious purposes.
Q: What are the conditions for exemption under Section 11(5)?
A: The conditions for exemption under Section 11(5) are as follows: (1) the property must be held for charitable or religious purposes, (2) the income derived from the property must be used solely for charitable or religious purposes, and (3) the property must not be used for any commercial purposes or the benefit of any individual.
Q: What are the restrictions on the use of income under Section 11(5)?
A: The restrictions on the use of income under Section 11(5) are as follows: (1) the income cannot be used for any purpose outside India, (2) the income cannot be used for any purpose that is not by the objects of the trust or institution, (3) the income cannot be used for any purpose that involves the carrying on of any activity like trade, commerce or business, and (4) the income cannot be used for any purpose that involves the rendering of any services about any trade, commerce or business.
Q: What happens if any of the conditions or restrictions are not satisfied?
A: If any of the conditions or restrictions listed in Section 11(5) are not satisfied, then the income derived from such properties may become taxable.
Q: Can income from properties held for charitable or religious purposes be used for other purposes?
A: No, income from properties held for charitable or religious purposes must be used solely for charitable or religious purposes to qualify for exemption under Section 11(5).
Q: Is Section 11(5) applicable only to income derived from properties held by trusts and institutions?
A: Yes, Section 11(5) applies only to income derived from properties held by trusts and institutions for charitable or religious purposes. It does not apply to income derived from other sources.
Q: What is the purpose of Section 11(5)?
A: The purpose of Section 11(5) is to encourage and promote charitable and religious activities, by providing tax exemption for income derived from such activities.
