Surplus in trust
This query is : Resolved
16 September 2015
I have a client - trust who is having surplus of Rs 175,000 for AY 2015-16, the client has to invest in modes specified u/s 11(5) of Income Tax Act, 1961 before due date of 139(1). Now, my query is that client is in need of money in the next month and please suggest a practical flexible mode of investment ? So that client can invest and claim investment for AY 2015-16!
16 September 2015
Deposit in any account with a scheduled bank- Section 11(5)(iii). Short term time deposit may be preferred.
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16 September 2015
But Sir, client now has only Rs 1 Lakh and Rs 75,000 was already utilized for the objects of the trust.
What has to be done in this case?
What has to be done in this case?
26 July 2025
Here’s how your client trust can handle the **surplus investment under Section 11(5) for AY 2015-16**, given the situation:
---
### Key points:
* The trust has a surplus of Rs. 1,75,000 but now only Rs. 1,00,000 is available (Rs. 75,000 already utilized).
* The trust needs to invest the surplus **before the due date of filing return (Section 139(1))** to claim exemption.
* Section 11(5) specifies the modes of investment eligible for claiming exemption, including:
* Deposits in a scheduled bank (current, savings, or fixed deposits),
* Government securities,
* Units of UTI or Mutual funds specified,
* Other modes mentioned under section 11(5).
---
### Practical and flexible investment options considering liquidity:
1. **Short-term Fixed Deposit in a Scheduled Bank:**
* Most practical and flexible.
* The trust can place the Rs. 1,00,000 in a fixed deposit with a tenor as short as one month or even less (some banks allow 7 days or 15 days fixed deposits).
* This will qualify as an investment under Section 11(5)(iii).
2. **Savings Bank Account Deposit:**
* Deposit the amount in a savings bank account in a scheduled bank.
* Allows instant withdrawal when funds are needed next month.
* Also eligible under Section 11(5)(iii).
3. **Liquid Mutual Funds:**
* Not explicitly mentioned in Section 11(5) but accepted by some tax authorities (less certain).
* Usually fixed deposits and bank deposits are safest from compliance perspective.
---
### Regarding the shortfall (only Rs. 1,00,000 now):
* The trust should invest **at least the available Rs. 1,00,000** in one of the specified modes before due date of filing return.
* The **remaining Rs. 75,000 already spent on trust objects** is not required to be invested.
* Section 11(5) applies only to surplus income **remaining unspent at the end of the year** and that amount needs to be invested.
---
### Summary for your client:
* Invest the available Rs. 1,00,000 surplus in a short-term fixed deposit or savings account in a scheduled bank before the due date of filing the income tax return.
* This will satisfy the investment requirement under Section 11(5).
* No need to invest the Rs. 75,000 already spent on the trust’s objectives.
---
If you want, I can help draft an investment plan or suggest banks with flexible short-term deposit schemes. Would you like that?
---
### Key points:
* The trust has a surplus of Rs. 1,75,000 but now only Rs. 1,00,000 is available (Rs. 75,000 already utilized).
* The trust needs to invest the surplus **before the due date of filing return (Section 139(1))** to claim exemption.
* Section 11(5) specifies the modes of investment eligible for claiming exemption, including:
* Deposits in a scheduled bank (current, savings, or fixed deposits),
* Government securities,
* Units of UTI or Mutual funds specified,
* Other modes mentioned under section 11(5).
---
### Practical and flexible investment options considering liquidity:
1. **Short-term Fixed Deposit in a Scheduled Bank:**
* Most practical and flexible.
* The trust can place the Rs. 1,00,000 in a fixed deposit with a tenor as short as one month or even less (some banks allow 7 days or 15 days fixed deposits).
* This will qualify as an investment under Section 11(5)(iii).
2. **Savings Bank Account Deposit:**
* Deposit the amount in a savings bank account in a scheduled bank.
* Allows instant withdrawal when funds are needed next month.
* Also eligible under Section 11(5)(iii).
3. **Liquid Mutual Funds:**
* Not explicitly mentioned in Section 11(5) but accepted by some tax authorities (less certain).
* Usually fixed deposits and bank deposits are safest from compliance perspective.
---
### Regarding the shortfall (only Rs. 1,00,000 now):
* The trust should invest **at least the available Rs. 1,00,000** in one of the specified modes before due date of filing return.
* The **remaining Rs. 75,000 already spent on trust objects** is not required to be invested.
* Section 11(5) applies only to surplus income **remaining unspent at the end of the year** and that amount needs to be invested.
---
### Summary for your client:
* Invest the available Rs. 1,00,000 surplus in a short-term fixed deposit or savings account in a scheduled bank before the due date of filing the income tax return.
* This will satisfy the investment requirement under Section 11(5).
* No need to invest the Rs. 75,000 already spent on the trust’s objectives.
---
If you want, I can help draft an investment plan or suggest banks with flexible short-term deposit schemes. Would you like that?
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