TRUST FUND APPROPRIATION

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SUNIL KAMAT (Querist)
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19 August 2022 During the F.Y.2021-2022 trust's income is more than expenditure and transfer to corpus @ 15% u/s 11(1)(a) is done still the trust want to transfer the surplus to further years. whether it is allowable ? at present surplus funds are deposited in saving bank account. please advise what is the procedure. Thanks in advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 August 2022
Accumulation beyond 15% of income under section 11(2). Such accumulations are subject to application within a maximum permissible period of 5 years. In other words income in excess of 15% cannot be retained by a charitable or religious organisation. If the income is not spent in the current year then the assessee is permitted to spend it within the next 5 years.
In short, where a trust or institution is unable to apply 85% of its income from property held under them, the income is still exempt if the following conditions are met.

The income is deemed to have been applied for charitable purposes in specified scenarios.[section 11(1)]
85% of income is neither applied not deemed to have been applied, the trust is allowed to accumulate such unapplied portion of income under specified conditions to claim the exemption.[11(2)]
Deemed application under [section 11(1)]:
Where whole or any part of the income has not been received during the year, the assesse has an option to apply such income for such purposes during the previous year in which it is received or during the previous year immediately following the said previous year. [Section 11(1)(a)]

Where assesse fails to apply whole or any part of the income received during the year, the assesse has an option to apply such income such purposes during the previous year immediately following the previous year in which the income was derived. [Section 11(1)(b)]

Above such option is to be exercised in form 9A to be furnished electronically to the assessing officer with or without digital signature by the trust on or before due date of filing the return.