Capital Gain - Charitable Trust

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This discussion explores whether a charitable trust can claim relief from Capital Gains Tax under Section 54EC by investing in specified bonds. It also investigates if the 85% rule for charitable activities can exempt the gain. While Section 54EC is generally available to all assessees, including companies, its applicability to charitable trusts is debated, with some suggesting it's not possible, while others argue it can be, provided the bonds are treated as capital assets and conditions under Section 11(1A) are met.

Rajesh Goyal

Rajesh Goyal (Querist)
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26 August 2020 One Charitable trust has earned Capital Gain on sale on land held as Capital Asset.

Can the trust avail benefit of Section 54EC by investing in bonds prescribed.

Further, can the Capital Gain Tax be avoided if the entire gain is invested (85% criteria for trust) for charitable activities during the year.

If any other better option is there, please suggest.

Regards.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 August 2020 The Capital Gain Tax can be avoided if the entire sale consideration is invested (85% criteria for trust) for charitable activities during the year.

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Rajesh Goyal

Rajesh Goyal (Querist)
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26 August 2020 Apart from 85% conditon, is a trust eligible for claiming benefit u/s 54EC.

As section 54EC says that it is "eiligible to all assessee including a company"

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 August 2020 54EC not applicable for charitable trust. Bank deposit or buying another property accepted.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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27 August 2020 (1) 54EC can be availed by trust because
* bonds specified therein is a capital asset per 2(14) and
* by depositing in the said bonds, trust satisfies 11(1A) (a)(i)/(ii).

Ps:- If net consideration is used for 54EC, full exemption, otherwise partial and the remaining capital gains forms income derived from property for 11(1)(a).

(2) 85 % criteria is applicable for capital gains if net sale consideration is not fully utilized for acquiring another capital asset.

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