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

Sampark Electoral Trust received voluntary contributions of Rs 8,00,00,000 in the tax year and had a surplus of Rs 2,00,00,000 brought forward from an earlier tax year. It functions as per the rules made by the Central Government. Under Schedule VIII, what minimum amount must it distribute to registered political parties during the tax year so that its voluntary contributions are not included in total income?

The trust must distribute Rs 9,50,00,000. The condition requires 95% of the donations received in the year plus any surplus brought forward, which is 95% of Rs 10 crore. Using only current-year donations would give Rs 7.6 crore, which is incorrect.

  1. ARs 9,50,00,000Correct
  2. BRs 7,60,00,000
  3. CRs 8,00,00,000
  4. DRs 9,00,00,000

Explanation

The condition requires distribution of 95% of the aggregate donations received during the tax year along with the surplus, if any, brought forward from any earlier tax year. Aggregate = 8,00,00,000 + 2,00,00,000 = 10,00,00,000. 95% = Rs 9,50,00,000. Taking 95% of only the current donations gives Rs 7,60,00,000, which ignores the brought forward surplus.

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