12.

Rationalisation of provisions of section 11 of the Income-tax Act relating to

accumulation of Income by charitable trusts and institutions

12.1 Under the provisions of section 11 of the Income-tax Act, the primary condition
for grant of exemption to trust or institution in respect of income derived from property
held under such trust is that the income derived from property held under trust should
be applied for charitable purposes in India. Where such income cannot be applied
during the previous year, it has to be accumulated and applied for such purposes in
accordance with various conditions provided in the section. While 15% of the income
can be accumulated indefinitely by the trust or institution, 85% of income can only be
accumulated for a period not exceeding 5 years subject to the conditions that such
person submits the prescribed Form 10 to the Assessing Officer in this regard and the
money so accumulated or set apart is invested or deposited in the specified forms or
modes. If the accumulated income is not applied in accordance with these conditions,
then such income is deemed to be taxable income of the trust or institution.

12.2 In order to remove the ambiguity regarding the period within which the assessee
is required to furnish Form 10, and to ensure due compliance of the above conditions
within time, the Income-tax Act has been amended to provide that the Form 10 shall be
furnished before the due date of furnishing the return of income specified under section
139 of the Income-tax Act for the fund or institution. In case the Form is not submitted
before this date, then the benefit of accumulation would not be available and such
income would be taxable at the applicable rate. Further, the benefit of accumulation
would also not be available if return of income is not furnished before the due date of
furnishing the return of income.

12.3 Under section 11 of the Income-tax Act, it has also been provided that if the
income from the property held under trust and applied to charitable or religious
purposes falls short of 85% of the income derived during the previous year for the
reason that the income has not been received during that year or any other reason, then
on exercise of the option by the trust/institution in writing on or before the due date of
furnishing the return of income, such income shall be deemed to have been applied for
charitable or religious purpose. There was no standard format for exercising the option.
Accordingly, the provisions of section 11 have also been amended to prescribe a format
for exercise of option by the trust/institution for the purposes of clause (2) of the
Explanation to sub-section (1) of section 11 of the Income-tax Act.

12.4 Applicability: - These amendments take effect from 1st April, 2016 and will,
accordingly, apply in relation to the assessment year 2016-17 and subsequent
assessment years.

13. Allowance of balance 50% additional depreciation

13.1 To encourage investment in plant or machinery by the manufacturing and power

sector, additional depreciation of 20% of the cost of new plant or machinery acquired
and installed is allowed under the existing provisions of section 32(1)(iia) of the
Income-tax Act over and above the general depreciation allowance. On the lines of