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

Sarvajan Electoral Trust received voluntary contributions of ₹10,00,000 during the tax year and had a surplus of ₹2,00,000 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 to satisfy the distribution condition of Schedule VIII?

The minimum distribution is ₹11,40,000. Schedule VIII requires an electoral trust to distribute 95% of the donations received in the year together with any surplus brought forward, so 95% of ₹12,00,000 is ₹11,40,000 to registered political parties.

  1. A₹9,50,000
  2. B₹10,00,000
  3. C₹11,40,000Correct
  4. D₹11,50,000

Explanation

The condition requires distribution of 95% of aggregate donations received during the tax year along with the surplus, if any, brought forward. Aggregate is ₹10,00,000 plus ₹2,00,000, giving ₹12,00,000, and 95% of this is ₹11,40,000. ₹9,50,000 ignores the brought forward surplus.

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