Relief to certain charitable institutions or funds in respect of certain dividends

Relief to certain charitable institutions or funds in respect of certain dividends

Chapter XVIII- Sec 236A

Eligibility for Relief – Sec 236A(1)

  • Where 75% of the share capital of any company is
  • throughout the previous year
  • beneficially held by an charitable institution which is exempt u/s 11,
  • credit shall be given to the institution or fund against the tax, if any, payable by it,
  • of a sum calculated u/ss (2),
  • in respect of its income from dividends (other than dividends on preference shares) and
  • where the amount of credit so calculated exceeds the tax, if any, payable by the said institution or fund, the excess shall be refunded.

Quantum of tax credit – Sec 236A(2)

Tax credit = Tax payable by Co* Dividends received by trust/ Total dividends distributed by Co

Permissible Modes of Investment by a Charitable Trust – Sec 11(5) read with Rule 17C

(i) investment in savings certificates as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government;

(ii) deposit in any account with the Post Office Savings Bank;

(iii) deposit in any account with a scheduled bank or a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank).

(iv) investment in units of the Unit Trust of India

(v) investment in any security for money created and issued by the Central Government or a State Government;

(vi) investment in debentures issued by, or on behalf of, any company or corporation both the principal whereof and the interest whereon are fully and unconditionally guaranteed by the Central Government or by a State Government;

(vii) investment or deposit in any public sector company:

Provided that where an investment or deposit in any public sector company has been made and such public sector company ceases to be a public sector company,—

(A) such investment made in the shares of such company shall be deemed to be an investment made under this clause for a period of three years from the date on which such public sector company ceases to be a public sector company;

(B) such other investment or deposit shall be deemed to be an investment or deposit made under this clause for the period up to the date on which such investment or deposit becomes repayable by such company;

(viii) deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long-term finance for industrial development in India and which is eligible for deduction u/s 36(1)(viii);

(ix) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and which is eligible for deduction u/s 36(1)(viii)

(ixa) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for urban infrastructure in India.
(x) investment in immovable property.
Explanation.—”Immovable property” does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth;
(xi) deposits with the Industrial Development Bank of India

(xii)        any other form or mode of investment or deposit as may be prescribed in Rule 17C:

(i)   investment in the units issued under any scheme of the mutual fund referred u/s 10(23D)
(ii)   any transfer of deposits to the Public Account of India
(iii)   deposits made with an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;
(iv)   investment by way of acquiring equity shares of a depository
(v)   investment made by a recognised stock exchange in the equity share capital of a company:

(A)    which is engaged in dealing with securities or mainly associated with the securities market;

(B)    whose main object is to acquire the membership of another recognised stock exchange for the prescribed purpose and

(C)    in which at least fifty-one per cent of equity shares are held by the investor and the balance equity shares are held by members of such investor;]

(vi)         investment by way of acquiring equity shares of an incubatee by an incubator.

(vii)        investment by way of acquiring shares of National Skill Development Corporation;]

(viii)       investment in debt instruments issued by any infrastructure Finance Company registered with the Reserve Bank of India

(ix)         investment in “Stock Certificate” as defined in clause (c) of paragraph 2 of the Sovereign Gold Bonds Scheme, 2015

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