Events & Personalities
Budget effects on trusts
The 2014-2015 national budget proposes several changes in the income tax laws that will impact trusts. In an email dated July 11, 2014, Noshir Dadrawala, chief executive officer of the Centre for Advancement of Philanthropy has noted cancellation of registrations has been expanded to four criteria as versus two earlier.
"The registration of an institution may be cancelled if it is noticed that it violates section 13,” writes Dadrawala. The four reasons cited are: "the income does not inure for the benefit of the general public; the benefit is for any particular religious community or caste (in case it is established after commencement of the Act); any income or property of the trust is applied for benefit of specified persons such as author of trust, trustees, etc; or its funds are invested in prohibited modes.”
Registration however will not be cancelled if it is "proved that there was a reasonable cause for the activities to be carried out in the above manner.” This provision will be effective from October 1, 2014.
Up to now registration of a charitable institution was liable to be cancelled under two circumstances, states Dadrawala: "The activities of a trust or institution are not genuine, or the activities are not being carried out in accordance with the objects of the trust or institution.”
The condition governing depreciation has also been modified: "A charitable institution which has been allowed the entire cost of asset as application of income will not be allowed a further deduction in respect of depreciation in computation of its income.
"Up to now, the preeminent view of courts has been that a charitable institution is entitled to deduct depreciation in computation of its income, even if it has been allowed the entire cost of acquisition of asset as application of income.”
Anonymous donations will now be taxed at "30% of the anonymous donations in excess of five percent of the total donations received by the assesse or one lakh rupees, whichever is higher.”
"The registration of an institution may be cancelled if it is noticed that it violates section 13,” writes Dadrawala. The four reasons cited are: "the income does not inure for the benefit of the general public; the benefit is for any particular religious community or caste (in case it is established after commencement of the Act); any income or property of the trust is applied for benefit of specified persons such as author of trust, trustees, etc; or its funds are invested in prohibited modes.”
Registration however will not be cancelled if it is "proved that there was a reasonable cause for the activities to be carried out in the above manner.” This provision will be effective from October 1, 2014.
Up to now registration of a charitable institution was liable to be cancelled under two circumstances, states Dadrawala: "The activities of a trust or institution are not genuine, or the activities are not being carried out in accordance with the objects of the trust or institution.”
The condition governing depreciation has also been modified: "A charitable institution which has been allowed the entire cost of asset as application of income will not be allowed a further deduction in respect of depreciation in computation of its income.
"Up to now, the preeminent view of courts has been that a charitable institution is entitled to deduct depreciation in computation of its income, even if it has been allowed the entire cost of acquisition of asset as application of income.”
Anonymous donations will now be taxed at "30% of the anonymous donations in excess of five percent of the total donations received by the assesse or one lakh rupees, whichever is higher.”
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