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April 16, 2020

Corpus donations received by Section 10(23C) institutions will be exempt from tax from April 2020

by facelesscompliance in Compliance Law, Corporate Law

All Public Trust & NGO registered under section 12A or 12AA are provided with the benefit of exemption in respect of corpus donations received. Any contribution by a charitable or religious trust to any other trust registered under Section 12AA, with a specific direction that it shall form part of the corpus of recipient trust is not considered as an application of income for the donor trust.

However, no such specific exemption was available to entities registered under section 10(23C). Hence, The Finance Act, 2020 inserted an Explanation to Section 10(23C) to clarify that the corpus donations shall not form part of the income of such institutions. It has been provided that any corpus donations received by such fund or institution or any university or other educational institution or any hospital or other medical institution, shall not be included in the income of such entities.

This amendment brings exemption available to institutions registered under section 10(23C), for the corpus donations, at par with exemption available to trusts or institutions registered under section 12A/12AA/12AB.

This will help all fund or institution or any university or other educational institution or any hospital or other medical institution, exclusion from the requirement of mandatory application of income in respect of corpus donations

Restricting Application of Income in case of Institution or Trust Donating to Other Institution or Trust

Contribution by a charitable or religious trust to any other trust registered under Section 12AA, with a specific direction that it shall form part of the corpus of recipient trust is not considered as an application of income for the donor trust The Finance Act 2020 inserted similar provision to Section 10(23C)

Now from April 2020 any contribution by fund or trust or institution or any university or other educational institution or any hospital or other medical institution with a specific direction to the trust or institution registered under section 12AA that it shall form part of the corpus of recipient trust, consequently, it shall not be treated as application of income for the donor

Corpus donations by one such entity to another entity shall not be treated as application of income. Corpus donations given by a Section 12AA registered institution to section 10(23C) approved institution will not be treated as an application of income.