Section 11 and 12 of the Income Tax Act deal with the computation of income from property held for charitable or religious purposes. These sections are crucial for entities that are registered as charitable or religious trusts and are exempt from tax under the Income Tax Act.
Section 11: Income from Property Held for Charitable or Religious Purposes
Under section 11, income from property held for charitable or religious purposes is exempt from tax if certain conditions are met. The income from the property must be applied for charitable or religious purposes, and the trust or institution holding the property must not be for profit.
The income that is exempt under section 11 includes:
- Income from property held under trust for a charitable or religious purpose
- Income from property held for a charitable or religious purpose
- Income from voluntary contributions received by a charitable or religious trust
However, the following incomes are not exempt under section 11:
- Income from business or profession carried on by the trust
- Income from the investment of the trust’s funds in any business or profession
- Income from the property held by the trust for profit
Section 12: Income from Contributions
Section 12 deals with the treatment of income received by a charitable or religious trust by way of voluntary contributions. Any voluntary contributions received by a trust are exempt from tax if the trust is registered under section 12AA of the Income Tax Act.
However, there are some exceptions to this rule. Voluntary contributions that are made with a specific direction that they should be applied for a particular purpose are not exempt from tax. Additionally, any voluntary contribution that is received from a foreign source, without approval from the central government, is not exempt from tax.
Section 11 provides exemptions for income earned by a trust or institution that is held for charitable or religious purposes. The section aims to encourage philanthropic activities by allowing such institutions to focus on their core activities without being burdened by tax liability. The section applies to all trusts and institutions that are registered for charitable or religious purposes and do not have any profit motive.
The section allows for the exemption of income from property held under trust for a charitable or religious purpose, income from property held for a charitable or religious purpose, and income from voluntary contributions received by a charitable or religious trust. The income that is exempt under this section must be used for charitable or religious purposes.
However, there are some incomes that are not exempt under section 11. These include income from business or profession carried on by the trust, income from investment of the trust’s funds in any business or profession, and income from the property held by the trust for profit.
Section 12 deals with the treatment of income received by a charitable or religious trust by way of voluntary contributions. The section provides for the exemption of income received by a trust or institution that is registered under section 12AA of the Income Tax Act. The section encourages individuals and entities to donate to charitable or religious trusts by providing tax exemptions for such contributions.
However, there are some exceptions to this rule. Any voluntary contribution that is made with a specific direction that it should be applied for a particular purpose is not exempt from tax. Additionally, any voluntary contribution that is received from a foreign source without approval from the central government is not exempt from tax.
In conclusion
sections 11 and 12 of the Income Tax Act are crucial for charitable and religious trusts. These sections provide exemptions for income earned by such trusts and encourage philanthropic activities. However, it is essential for these trusts to comply with the conditions mentioned in these sections to avail of the exemptions provided.
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Frequently Asked Questions (FAQs)
Q: What is section 11 of the Income Tax Act?
A: Section 11 of the Income Tax Act deals with the computation of income from property held for charitable or religious purposes. It provides exemptions for income earned by a trust or institution that is held for charitable or religious purposes.
Q: What incomes are exempt under section 11?
A: Incomes that are exempt under section 11 include income from property held under trust for a charitable or religious purpose, income from property held for a charitable or religious purpose, and income from voluntary contributions received by a charitable or religious trust.
Q: What incomes are not exempt under section 11?
A: Incomes that are not exempt under section 11 include income from business or profession carried on by the trust, income from investment of the trust’s funds in any business or profession, and income from the property held by the trust for profit.
Q: What is section 12 of the Income Tax Act?
A: Section 12 of the Income Tax Act deals with the treatment of income received by a charitable or religious trust by way of voluntary contributions. It provides exemptions for income received by a trust or institution that is registered under section 12AA of the Income Tax Act.
Q: What contributions are exempt under section 12?
A: Voluntary contributions received by a trust or institution that is registered under section 12AA of the Income Tax Act are exempt under section 12.
Q: Are there any exceptions to the rule of exemption under section 12?
A: Yes, voluntary contributions that are made with a specific direction that they should be applied for a particular purpose are not exempt from tax. Additionally, any voluntary contribution that is received from a foreign source without approval from the central government is not exempt from tax.
Q: Who can avail of the exemptions provided under sections 11 and 12?
A: The exemptions provided under sections 11 and 12 can be availed of by trusts or institutions that are registered for charitable or religious purposes and do not have any profit motive. These trusts or institutions must comply with the conditions mentioned in these sections to avail of the exemptions provided.
