A Charitable Trust Can Give Donation To Other Charitable Trust And Such Donation Can Be Treated As Application Of Income

A Charitable Trust Can Give Donation To Other Charitable Trust And Such Donation Can Be Treated As Application Of Income 

Jayesh Dadia,
Chartered Accountant

I want to know how to decide the residential status of an individual under the Income Tax Act and its implications?

Under Section 6(1) of the Income Tax Act, an individual is said to be a resident in India in any previous year (i.eApril to March) if he satisfies atleast one of the following basic conditions: a) He is in India in the previous year for a period of atleast 182 days b) He is in India in the previous year for a period of atleast 60 days or more during the previous year and atleast 365 days or more during four years immediately precedingthe previous year. However, the period of 60 days referred to in b) above may be read as 182 days if an India citizen leaves India during the previous year for the purpose of employment outside India, or as a member of crew of an Indian ship. For example – Mr A, who is an Indian citizen, is in India during the financial year 2017-18 for a period of only 120 days because he left India during the financial year 2017-18 for employment outside India, then Mr A is not a resident in India for the financial year 2017-18. However, if Mr A has not taken any employment outside India, then he will be treated as a resident even though he has not stayed in India for more than 182 days.

All those persons who are not resident in India in a particular previous year would be considered as ‘non-residents'.

Once you are resident in India, then your global income would be taxed, whether or not the same is accrued or received in India. But if you are a non-resident, then only the income which is received or accrued in India is taxable. 

I own one residential property which I have decided to give on a rent of Rs.60,000 per month. Can you explain me how to compute my tax liability and various compliances under the Income Tax Act?

I have acquired the residential property out of borrowed funds and I pay interest of Rs2,00,000 annually. Since you are the owner of the property, the rental income would be taxed under the head "Income from House Property" in accordance with Section 22 to 24 of the Income Tax Act. Your gross rental income is Rs.7,20,000. If you are paying any municipal taxes, the same can be deducted from the gross rental. You will also be entitled to notional deduction of 30% of the net rental income. You will also get deduction of Rs2,00,000 being the interest paid on the borrowed funds under section 24 of the Income Tax Act.

The tenant would deduct TDS at 10% at the end of the previous year in the month of March. You will get credit of the TDS deducted in your hands when you compute your tax liability.

I am a trustee of a charitable trust registered under the Income Tax Act and also having 80G certificate. The total income of the trust during the financial year 2017-18 on account of interest on bank fixed deposits is Rs.20 lakh. We have spent on the object of the trust Rs.6 lakh only. Thus, there is a surplus fund of Rs.14 lakh. Is the surplus is taxable? Whether a charitable trust can give its surplus to another charitable trust? Whether the surplus can be accumulated and spent in subsequent year?

Since you are a charitable trust registered under the Income Tax Act, the trust income can enjoy exemption under section 11 of the Income Tax Act, if the trust spendsatleast 85% of the current year's income on the object of the trust. Since the trust has not spent 85% of the income, the surplus is taxable.

Yes, a charitable trust can give donation to other charitable trust and such donation can be treated as application of income, provided the donation is not towards corpus of the other charitable trust.

Further, the surplus can also be accumulated to be spent over a period of 5 years provided the trust files a statement in Form 10 with the Assessing Officer stating the purpose for which the income is being accumulated or set apart and the said form has to be filed on or before the due date of filing the return.

I am an 80-year-old lady. I have sold certain personal assets, such as furniture & fixture, designer clothes, watches and motor car.I received a total consideration of Rs.10 lakh for these personal assets. Is this amount taxable under the Income Tax Act?

I have also interest income of Rs.5 lakh. The amount of Rs 10 lakh received by you on sale of your personal assets is not taxable. Section 2(14) of the Income Tax Act defines capital assets, which are subject to capital gain tax. The personal assets of an individual, such as movable property, including wearing apparels and furniture& fixtures for personal use, have been excluded from the definition of capital asset. Since all these assets, which you have sold, were for your personal use, the same is outside the purview of capital assets and, therefore, not subject to tax.

The interest income of Rs 5 lakh is taxable. However, the entire income would be exempt from tax since you are a senior citizen of 80 years..