Conditions for Applicability of Sections 11 and 12

Table of Contents

A. Basic Conditions for Section 11 (Income from Property Held for Charitable/Religious Purposes)

Registration Requirement
- Must be registered under:
  - Section 12A (old regime)
  - Section 12AA (permanent registration)
  - Section 12AB (provisional/new regime)

Nature of Income
- Applies only to income from:
  - Property held under trust
  - Voluntary contributions (Section 12)
  - Capital gains (if reinvested as per Section 11(1A))

Application of Income
- Minimum 85% of income must be applied to charitable purposes in India in the same financial year
- Maximum 15% can be accumulated (must be invested as per Section 11(5))
Investment Conditions
- Accumulated funds must be invested only in specified modes (govt securities, approved mutual funds etc.)
No Violation of Section 13
- Income/property must not benefit:
  - Author/creator of trust
  - Trustees or relatives
  - Substantial contributors (>₹50,000)

Source of Contributions
- Applies to all voluntary donations except:
  - Corpus donations (if separately identified)
  - Anonymous donations (subject to Section 115BBC limits)

Utilization Condition
- Donations must be used for charitable purposes in India
- Can be accumulated (subject to Section 11 rules)
Special Cases
- Religious trusts must spend income primarily in India
- Foreign contributions require FCRA registration

Private Benefit
- No direct/indirect benefit to specified persons
Political Activities
- No participation in political campaigns
Non-Charitable Expenditure
- Funds cannot be used for non-charitable purposes

Annual Filings
- ITR-7 (mandatory for all trusts)
- Form 10B (audit report if income >₹5 lakh)
- Form 10 (for accumulations)
Record Keeping
- Separate books for business/non-business income
- Donor records (for contributions >₹10,000)
Recent Amendments (2023)
- Stricter TDS compliance
- Digital payments encouraged (>₹10,000 transactions)