GUWAHATI: The Central Board of Direct Taxes (CBDT) has addressed concerns regarding the tax treatment of donations made by trusts or institutions under the Income-tax Act, 1961.
In accordance with the Finance Act, 2023, donations made by such entities, excluding contributions towards corpus, are considered as applications for charitable or religious purposes, but only up to 85% of the donated amount.
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Recently, the CBDT received representations questioning whether the remaining 15% of the donation to other trusts or institutions would be subject to taxation or eligible for accumulation, considering that the funds have already been disbursed.
Following a thorough examination of the matter, the CBDT has issued Circular No. 3/2024, dated March 6, 2024, to provide clarity on the issue. The circular includes examples to facilitate better understanding of the tax treatment of such donations.
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Interested parties can access the full circular, along with the examples, on the official website of the Income Tax Department.