Skip to content

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

Samaj Electoral Trust received donations of ₹50 crore in a tax year, with no brought-forward surplus. It distributed ₹46 crore to registered political parties in that year and retained the rest. It otherwise functions as per the rules made by the Central Government. Which statement is correct under Schedule VIII and section 12 of the Income-tax Act, 2025?

The voluntary contributions are charged to tax for that year. The trust had to distribute 95% of ₹50 crore, that is ₹47.5 crore, but gave only ₹46 crore. Under section 12(2) failure of the condition means the enumerated income is taxed for that tax year.

  1. AVoluntary contributions are not included in total income, as the distribution exceeds 90%
  2. BOnly the undistributed ₹4 crore is taxed, the remaining ₹46 crore stays excluded
  3. CVoluntary contributions are charged to tax for that tax year, as only 92% of ₹50 crore was distributed against the required 95%Correct
  4. DVoluntary contributions are not included, because the shortfall can be distributed in the next tax year

Explanation

Required distribution is 95% of ₹50 crore = ₹47.5 crore. Actual ₹46 crore is 92%, a shortfall of ₹1.5 crore. Since the condition is not satisfied, section 12(2) charges the enumerated income to tax for that tax year; the Schedule gives no partial relief and no carry-over of the shortfall.

Did you get it right without looking?

One question tells you little. A timed set on Assessment of Trusts and Institutions, Political Parties and Other Special Entities shows your real accuracy, how long you take and where you lose marks.

Practise Assessment of Trusts and Institutions, Political Parties and Other Special EntitiesFree diagnostic mock

More Assessment of Trusts and Institutions, Political Parties and Other Special Entities questions