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Section 181 donation by company to trust

Vinayak (CA Job) (29 Points)

24 April 2016

Whether a Private Limited Company can make donations to trust (registered under 12A & 80G of IT Act) wherein one of the donating company director is a trustee?

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9 Replies

CS Arjun Rajagopal (B.com, ACS) (1056 Points)
Replied 24 April 2016

Originally posted by : Vinayak
	Whether a Private Limited Company can make donations to trust (registered under 12A & 80G of IT Act) wherein one of the donating company director is a trustee?

As per Sec 181 of the Companies Act, 2013 there is no restriction in making such contribution.

However if such contribution exceeds 5% of average net profits during immediately preceeding three financial years then shareholders approval by way of ordinary resolution is required.

Kindly wait for learned members views.

1 Like

Jatin Bajaj (CS) (2928 Points)
Replied 25 April 2016

I, Completely agree with Mr. Arjun. There is no such restriction for Private Limited Company for making such Contribution.

According to section 181 of Companies act 2013, The Board of Directors of the Company may Contribute to bonafide charitable and other funds.

But as per the law language, Board of Directors of the Company MAY contribute. So it is not mandatory to contribute but for good Corporate Governance and Best CSR practices Board of Directors of the Company contributes towards charitable and other funds.

Proviso to section 181(1) states that prior permission of Company in general meeting shall be required for such contribution if agregate of which in financial year exceeds 5% of its average net profits for 3 immediately preeceding financial Years.

Vinayak (CA Job) (29 Points)
Replied 25 April 2016

Thanks Jatin, I too agree with you, however as a matter of precaution considering whether other provisions like related party transactions are attracting since the one of the trustee is a director of the donating company. In my understanding in any such cases special resolution of the member is sufficient to donate to the trust wherein director is a trustee, Please correct me if I am wrong

sushilkumar ighe (pune) (25 Points)
Replied 14 January 2019

whether net profit is after tax or before tax to be consider ? plz suggest

sushilkumar ighe (pune) (25 Points)
Replied 14 January 2019

sir plz suggest whether average profit for last 3 years to be consider after tax or Before Tax ?

NaguPandian (Manager) (24 Points)
Replied 17 October 2019

Donation for tax relaxing to company, So before tax file recommend transaction.

NaguPandian (Manager) (24 Points)
Replied 17 October 2019

1. Discuss verbal

2. Make a documentation

3. Do transaction for donation

4. File TAX and return

Busy Bee (2 Points)
Replied 17 August 2020

Can Private Limited Company donate office premises to trust? What will be the impact on tax and other process?

Sureshkumar Vemuri (2 Points)
Replied 26 January 2023

For the donation being made under 80G by PVT Ltd company, can the payment be made from Director’s credit card? Also, Is it advisable to make donation from company (PVT Ltd) or from personal account of Director?