Under which circumstances an exemption of Sections 11 and 12 will be withdrawn?

Ans. The exemption to a charitable or religious organisation will be withdrawn if any of the provisions of Section 13 are violated, even if other conditions of Sections 11, Section 12, and Section 12A are complied with. An organisation, under the following circumstances, may lose its exemptions under Section 11 and Section 12:

a. If any part of the income from the property held under a trust for private religious purposes does not ensure for the benefit of the public.

b. If a charitable trust or institution is created for the benefit of any particular religious community or caste, no part of the income applied to such purposes is exempt from tax.

c. If part of the income is used or applied for the benefit of an interested person, then only such part of the income shall not be considered for the exemption to the trust or institution. The exemption for the balance income shall not be withdrawn just because a part of the income is applied for the benefit of the interested person.

d. If funds are deposited or invested in impermissible mode, then only income to the extent of such deposit or investment shall not be considered for the exemption. The exemption for the balance income shall not be withdrawn just because funds are deposited or invested in an impermissible mode.

e. The exemptions under Section 11 and Section 12 shall not be available in respect of the anonymous donations taxable as per the provisions of Section 115 BBC.

f. If the trust violates the proviso to Section 2(15). In other words, if a trust is engaged in business activity and the aggregate receipts from such activity during the previous year exceed 20% of the total receipts.

The exemption shall not be available for the amount accumulated under section 11(2) if the Form 10 and Income-tax return for the corresponding financial year are not submitted within the due date prescribed under Section 139(1).