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CA Final · Direct Tax Laws & International Taxation · Assessment of Trusts and Institutions, Political Parties and Other Special Entities

Bharat Electoral Trust received voluntary contributions of ₹20 crore during the tax year. It had a surplus of ₹2 crore brought forward from an earlier tax year. It functions as per the rules made by the Central Government. Under Schedule VIII of the Income-tax Act, 2025, what minimum amount must it distribute to registered political parties during the tax year to keep its contributions out of total income?

The minimum is ₹20.90 crore. The trust must distribute 95% of the donations received in the year together with the surplus brought forward, so 95% of ₹22 crore (₹20 crore plus ₹2 crore) equals ₹20.90 crore.

  1. A₹19.00 crore
  2. B₹20.90 croreCorrect
  3. C₹20.00 crore
  4. D₹20.00 crore less ₹2 crore, that is ₹18 crore

Explanation

The condition requires distribution of 95% of aggregate donations received during the year along with the surplus, if any, brought forward. Base = 20 + 2 = ₹22 crore; 95% of 22 = ₹20.90 crore. Option ₹19 crore is 95% of 20 alone, ignoring the brought-forward surplus.

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