Clause - 008 - Amendment of section 11.

THE FINANCE BILL, 2017

Clause 8 of the Bill seeks to amend section 11 of the Income-tax Act relating to income from property held for charitable or religious purposes.

Sub-section (1) of the said section provides that voluntary contributions made by a trust to any other trust or institution, except those made out of accumulated income, is considered as application of income for the purposes of its objects.

It is proposed to insert a new Explanation 2 under the said sub-section so as to provide that in respect of any amount credited or paid, out of income referred to in clause (a) or clause (b) read with Explanation 1, being contributions with a specific direction that they shall form part of the corpus of the trust or institution shall not be treated as application of such contribution to charitable or religious purposes.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply to the assessment year 2018-2019 and subsequent years.

 

Corpus-directed contributions are not treated as application of income under income-tax law, limiting trust deductions. A new explanation excludes from application-of-income treatment any amount credited or paid out of a trust's income when the contribution is made with a specific direction that it shall form part of the recipient trust's corpus, clarifying that such corpus-directed transfers will not count as application of income for charitable or religious purposes while preserving existing rules for accumulated-income transfers.