Section 11 – Income from Property Held for Charitable or Religious Purposes

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  • Last Updated on 29 January, 2021

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Any income derived from the property held under trust for charitable or religious purposes shall not form part of the total income subject to the provisions contained in section 60 to 63 for clubbing of income. The income which shall not form part of the total income of the trust includes following:
• Any income derived from the property held under trust for charitable or religious purposes provided such income is utilised for charitable or religious purposes in India. However if such income is not utilised for these purposes but accumulated or set apart for the purpose of its application for these purposes then also such income shall not form part of the total income. Maximum of 15% of the total income derived from such property is allowed to be accumulated or set apart. • Any income derived from property held partially under trust (incorporated before commencement of Income-tax Act) provided such income is utilised for charitable or religious purposes in India. However if such income is not utilised for these purposes but accumulated or set apart for the purpose of its application for these purposes then also such income shall not form part of the total income. Maximum of 15% of the total income derived from such property is allowed to be accumulated or set apart.  
• Any income which is derived from a property held under the trust created on or after April 1, 1952, only for charitable purpose and is tending to promote international welfare in which India is interested. However such income is exempted to the extent to which such income is applied for welfare purposes outside India. However, in case of a charitable or religious trust which is established before April 1, 1952, exemption is available if the income is applied to such welfare purposes outside India.
• Further any income in form of voluntary contributions which are made with the specific direction that these contributions shall form part of corpus of a trust or institution shall not form part of the total income. While computing 15% of the total income for the purpose of computing the extent to which exemption shall be allowed in first two cases voluntary contributions referred under section 12, if any, shall also form part of the total income.

Capital Gains:

When a capital asset which was held under trust wholly for a charitable or religious purpose is transferred and whole or a part of the net consideration is being utilized to acquire any other capital assets to be held for the same purpose, then the capital gain arising from the transfer of such an asset shall deemed to have been applied to charitable or religious purposes to the following extent- 1. When the whole of net consideration is utilized in acquiring the new capital asset, the whole of such capital gain. 2. Where only part of net consideration is utilized for acquiring the new capital asset,then only such capital gain shall be exempted which will be equals to the amount by which the cost of new asset exceeds the cost of the transferred asset. For example: If cost of the asset transferred was Rs. 20 lakhs and the amount of capital gains is Rs. 10 lakhs. The new asset is acquired for Rs. 25 lakhs then the amount of capital gain which will be exempt shall be computed as: Capital Gain to be exempt = Cost of new asset – cost of transferred asset I.e. Rs. 25 lakhs – Rs. 20 lakhs = Rs. 5 Lakhs

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