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Taxation of Anonymous Donations received by Trust (Section 115BBC)

  1. What is Anonymous Donations received by Trust [Section 115BBC(3)]

  2. Special Rate of Tax in case of Anonymous Donations received by Trust [Section 115BBC(1)]

    1. Institutions Liable to pay Tax on Anonymous Donations [Section 115BBC(1)]

    2. Institutions Not Liable to pay Tax on Anonymous Donations [Section 115BBC(2)] -

    3. Tax on the Total Income of the Trust which include Anonymous Donation also :

  3. When Commercial Receipts exceeds Rs. 25,00,000 the specified threshold [Sec. 13(8)] -

Section 13 has been amended from the assessment year 2007- 08 to the effect that any anonymous donation will not be eligible for deduction under sections 11 and 12.

1. What is Anonymous Donations received by Trust [Section 115BBC(3)]

The expression “anonymous donation” has been defined as follows—

  1. It is a voluntary contribution referred to in section 2(24)(iia).

  2. The person receiving such contribution does not maintain a record of—

    1. the identity indicating the name and address of the person making such contribution; and

    2. such other records as may be prescribed.

2. Special Rate of Tax in case of Anonymous Donations received by Trust [Section 115BBC(1)]

“Anonymous donation” would be taxable at the rate of 30 %.

However, from the assessment year 2010-11, anonymous donations are taxable only to the extent such donation exceeds Rs. 1,00,000 or 5% of total donations received by the trust, whichever is higher.

(A). Institutions Liable to pay Tax on Anonymous Donations [Section 115BBC(1)]

Any income received by way of anonymous donations by the following entities shall be included in the total income and taxed at the rate of 30%. -

  1. any trust or institution referred to in section 11;

  2. any university or other educational institution referred to in section 10(23C)(iiiad) and (vi); i.e. its annual receipts is less than or more than Rs. 1 crore;

  3. any hospital or other institution referred to in section 10(23C)(iiiae) and (via); i.e. its annual receipts is less than or more than Rs. 1 crore;

  4. any fund or institution referred to in section 10(23C)(iv); and

  5. any trust or institution referred to in section 10(23C)(v).

(B). Institutions Not Liable to pay Tax on Anonymous Donations [Section 115BBC(2)] -

The following entities shall not be liable to pay tax on anonymous donations received by them:

  1. donations received by any trust or institution created or established 'wholly for religious purposes '; and

  2. donations received by any trust or institution created or established for both religious as well as charitable purposes.

However, donation mentioned in (ii) (supra) does not include any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution. 

  • There is no line of demarcation in the Hindu system between religion and charity. The “religious purpose” also includes relief to the poor, education, and medical relief, etc. Thus, where the objects of a trust exhibits the dual tenor of religious and charitable purpose and activities and anonymous donation is received by it without any specific direction that such donation is for any university or other educational institutions or any hospital or other medical institutions run by the trust, such donation cannot be taxed by invoking provisions of section 115BBC—

The following conclusions can be drawn from the aforesaid discussion : -

Institution receiving anonymous donations

Tax treatment

Case 1 - Wholly religious entities

Section 115BBC is not applicable

Case 2 - Partly religious and partly charitable entities

If anonymous donation is made to an educational or medical institution run by such entity, such anonymous donation is taxable at the rate of 30 per cent* [see Notes]. Any other anonymous donation is not subject to tax under section 115BBC

Case 3 - Wholly charitable entities

All anonymous donations are taxed at the rate of 30 % *[see Notes] under section 115BBC

Notes -

The following points are applicable from the assessment year 2010-11 onwards—

  1. If aggregate anonymous donation is Rs. 1 lakh or less, section 115BBC will not be applicable.

  2. If aggregate anonymous donation is more than Rs. 1 lakh but it is not more than 5 per cent of the total donations received by the assessee, section 115BBC will not be applicable.

  3. If aggregate amount of anonymous donation is more than Rs. 1 lakh or 5 per cent of the total donations received, whichever is higher, the excess amount will be subject to tax at the rate of 30 % * under section 115BBC. However, it will be taxable only in the cases of Case 2 and Case 3 noted above.

(C) Tax on the Total Income of the Trust which include Anonymous Donation also :

Where the total income of a trust or an institution referred to in section 115BBC(1) includes an income by way of any anonymous donations, the income tax payable shall be the aggregate of—

  1. the amount of income-tax calculated at the rate of 30% on the aggregate of anonymous donations received in excess of the higher of the following, namely:

    1. 5% of the total donations received by the assesse; or

    2. Rs. 100,000 and

  2. the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the aggregate of anonymous donations received in excess of the amount referred to in sub-clause (A) or sub-clause (B) of clause (i) above, as the case may be.

Therefore, if such amount of donation which is not treated as anonymous donation is not applied like any other income, it will become taxable.

3. When Commercial Receipts exceeds Rs. 25,00,000 the specified threshold [Sec. 13(8)] -

Where the activity of any trust or institution is of the nature of advancement of any other object of general public utility, it involves carrying on of any activity in the nature of trade, commerce or business and the aggregate value of receipts from the commercial activities exceeds Rs. 25,00,000 in the previous year, then the purpose of such institution shall not be considered as charitable. Such trust or institution will not be entitled to get benefit of exemption with effect from the assessment year 2009-10 under sections 11 and 12 [and also section 10(23C)] in respect of its income for that previous year for which such receipts exceed Rs. 25,00,000.

CONTENT : Assessment of Trust

Related Topics.....Assessment of TRUST

 
 
 
 
 
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