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of <h1>Clarification on Section 11: Donor Trusts' Tax Exemption Valid Only if Donations Are Assuredly Used for Charitable Purposes.</h1> The circular addresses the scope of Section 11 of the Income Tax Act, 1961, concerning donations from one charitable trust to another. Initially, it was instructed that such donations would be considered as income applied for charitable purposes, thus maintaining the donor trust's tax exemption. However, concerns were raised about potential misuse to bypass income accumulation restrictions. Citing judgments from the Bombay and Madras High Courts, the Ministry of Law advised that the donor trust's tax exemption should only be granted if the donated funds are assuredly used for charitable purposes. Consequently, the original instruction was modified to reflect this requirement.
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