The Government of India provides hefty tax discounts on income from a property held for religious purposes or charity. Individuals who are eligible to claim such deductions need to have intricate knowledge about Section 11 of Income Tax Act. This article deals with the specific circumstances in which one can avail these tax rebates.
Section 11 of Income Tax Act, 1961 deals with exemptions that are earned from property owned by charitable organisations and trusts.
To be eligible for exemption under this specific section of IT Act, any institution or trust should be registered under Section 12AA of Income Tax Act, 1961. However, apart from this, there are certain conditions of this section that persons must be aware of to make the most of it.
Each section of IT Act of India, 1961, consists of certain exemptions, and there are some specific conditions that the Income Tax Department sets. In the case of Section 11 of Income Tax Act, the conditions that need to be followed are mentioned below:
Now that you have a brief idea of the conditions that are necessary for Section 11, to know the type of income applicable for exemption, refer to the following section.
Once you get a clear knowledge of Section 11 of Income Tax Act, understanding its exemptions applicable would automatically get easier. Under Section 11 of Income Tax Act, the following types of income are eligible for the exemption:
While going through Section 11 of Income Tax Act explanation, you will come across voluntary donations for which tax exemption is applicable. These voluntary donations or contributions that charitable trusts or institutions receive can be of two different kinds. These are:
As mentioned earlier, this particular section of Income Tax Act deals with an exemption on income utilised for charitable and religious purposes.
These charitable purposes can be:
In terms of religious purposes, the section has no particular definition or exemptions. However, aid to any particular religion can fall under this category.
After going through the above-mentioned information related to Section 11 of Income Tax Act, taxpayers must assess their liabilities. If further help is necessary, one can also approach a tax consultant to know more.
Ans: If 85% of the income that a trust earns is not applied, it can be set apart under Section 11 (2). This income will not be included in case of the following conditions:
If a taxpayer fails to furnish Form 10/Form 9A
If the accumulated funds are not parked in safe investment avenues
If the donation of these funds happens to a separate trust
Ans: The Income Tax department withdraws Section 11(2) exemptions in case of the following:
If you apply the funds for any other purpose besides its original accumulation purposes
If the accumulated income does not remain invested as per Section 11(5)
If you do not use the exempted amount within a specified time, it will be taxable in the following FY.
Ans: The following are some conditions that trusts must meet:
A trust should be completely for religious or charitable purposes.
Only income generated from a property that the trust owns will be eligible for exemptions.
A private trust is not eligible for benefits under Section 11. Only public religious or charitable trusts qualify for the same.
Ans: One can claim depreciation under Section 11 of Income Tax Act. There are no limitations or any deductions that fall under depreciation. Note that depreciation is not applicable if the acquired asset falls under application of income.
Ans: As per Section 11 (2), you can accumulate beyond 15% of your income. Keep in mind that the maximum permissible time for such accumulations is 5 years. This means that you cannot keep income beyond 15% accumulated for more than 5 years.
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