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

Nirvachan Samarthan Electoral Trust received voluntary contributions of Rs 9,00,00,000 in the tax year. It had a surplus of Rs 1,00,00,000 brought forward from an earlier tax year. It functions as per the rules made by the Central Government. What is the minimum amount it must distribute to registered political parties during the tax year for its voluntary contributions to stay excluded from total income?

The minimum distribution is Rs 9,50,00,000. The condition requires an electoral trust to distribute 95% of the donations received in the tax year together with any surplus brought forward. Adding Rs 9 crore and Rs 1 crore gives Rs 10 crore, and 95% of that is Rs 9.5 crore.

  1. ARs 8,55,00,000
  2. BRs 9,00,00,000
  3. CRs 9,50,00,000Correct
  4. DRs 9,45,00,000

Explanation

Condition (a) requires distribution of 95% of aggregate donations received during the tax year along with the surplus, if any, brought forward. Aggregate = 9,00,00,000 + 1,00,00,000 = 10,00,00,000. 95% = Rs 9,50,00,000. Rs 8,55,00,000 ignores the brought-forward surplus.

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