As per section 11 of the I. Tax Act, a charitable trust must apply at least 85% of the income on the trusts objects. The balance 15% will be deemed to be accumulated for the purpose of charity and is exempt from tax.
If due to any reason, the amount spent on the objects of the trust is less than 85% of its total income; and the deficiency is not carried forward, then the same is considered as taxable income and taxed at slab rates.
In view of the above if in case a charitable trust is unable to spend 85% on its objects and this 85% is below the basic exemption limit of Rs. 2.00 lacs thereby resulting in NIL tax liability. Can there be any adverse repercussions in this respect if every subsequent years it does not spend 85% on its objects and as the said amount being below taxable limit no tax is paid
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