Amendment of section 11.
6. In section 11 of the Income-tax Act, with effect from the 1st day of April, 2022,––
(a) in sub-section (1),––
(i) in clause (d), for the word“institution”, the words, brackets and figures “institution, subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub-section (5) maintained specifically for such corpus” shall be substituted;
(ii) after Explanation 3, the following Explanations shall be inserted, namely:––
“Explanation 4.––For the purposes of determining the amount of application under clause (a) or clause (b),––
(i) application for charitable or religious purposes from the corpus as referred to in clause (d) of this sub-section, shall not be treated as application of income for charitable or religious purposes:
Provided that the amount not so treated as application, or part thereof, shall be treated as application for charitable or religious purposes in the previous year in which the amount, or part thereof, is invested or deposited back, into one or more of the forms or modes specified in sub-section (5) maintained specifically for such corpus, from the income of that year and to the extent of such investment or deposit; and
(ii) application for charitable or religious purposes, from any loan or borrowing, shall not be treated as application of income for charitable or religious purposes:
Provided that the amount not so treated as application, or part thereof, shall be treated as application for charitable or religious purposes in the previous year in which the loan or borrowing, or part thereof, is repaid from the income of that year and to the extent of such repayment.
Explanation 5.––For the purposes of this sub-section, it is hereby clarified that the calculation of income required to be applied or accumulated during the previous year shall be made without any set off or deduction or allowance of any excess application of any of the year preceding the previous year.”;
(b) in sub-section (2), in the Explanation, after the figures and letters “12AA”, the words, figures and letters “or section 12AB” shall be inserted;
(c) in sub-section (3), in clause (d), after the figures and letters “12AA”, the words, figures and letters “or section 12AB” shall be inserted.
Notes on Clauses:
Clause 6 of the Bill seeks to amend section 11 of the Income-tax Act relating to income from property held for charitable or religious purposes.
Clause (d) of sub-section (1) of the said section provides that voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution shall not be included in the total income of the trust or institution.
It is proposed to amend the said clause (d) so as to provide that such voluntary contributions should be invested or deposited in one or more of the forms or modes specified in sub-section (5) maintained specifically for such corpus.
It is further proposed to insert a new Explanation 4 to sub-section (1) so as to provide that––
(A) application out of the corpus shall not be considered as application for charitable or religious purposes for the purposes of clause (a) and (b) of sub-section (1), provided when it is invested or deposited back, into one or more of the forms or modes specified in subsection (5) maintained specifically for such corpus, from the income of the previous year, such amount shall be allowed as application in the previous year in which it is deposited back to corpus and to the extent it is deposited back.
(B) application from loans and borrowings shall not be considered as application for charitable or religious purposes for the purposes of clause (a) and (b) of sub-section (1), provided when such loan or borrowing is repaid from the income of that previous year, such repayment shall be allowed as application in the previous year in which it is repaid and to the extent it is repaid.
It is also proposed to insert a new Explanation 5 to the said sub-section so as to provide that for the computation of income required to be applied or accumulated during the previous year, no set off or deduction or allowance of any excess application, of any of the year preceding the previous year, shall be allowed.
Explanation to sub-section (2) provides that if any trust or institution accumulates or set off apart its income then payment or credit out of such accumulation, to exempt entities as prescribed in the Explanation, shall not be treated as application. Clause (d) of sub-section (3) provides that such income, credited or paid to entities prescribed, shall be deemed to be income of the trust or institution.
It is proposed to make a reference of section 12AB in the said Explanation to the said sub-section (2) and clause (d) of sub-section (3), which provides for the procedure of registration.
These amendments will take effect from 1st April, 2022 and will, accordingly, apply in relation to the assessment year 2022-2023 and subsequent assessment years.
