Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Unconditional vs conditional accumulation
A trust doesn’t have to spend everything immediately. It can accumulate up to 15% of its income with no conditions — this is the flip side of the 85% application rule. Beyond 15%, accumulation is allowed but becomes conditional.
The Form 10 route
To accumulate more than 15% for a specific future purpose (building, equipment, a programme), the trust must file Form 10 declaring the purpose and period, and invest the accumulated funds in specified modes. It must then spend the money within five years on that purpose — if it doesn’t, or diverts it, the amount is taxed in the year the condition is breached. Confirm the current accumulation period and investment modes.
A worked example
Example: a trust wants to build a hostel costing ₹1 crore over four years. It files Form 10 to accumulate income for that purpose, parks it in permitted investments, and spends it on the hostel within five years — keeping the accumulation exempt. Fail to build it in time, and the accumulated sum is taxed. Planning accumulation properly preserves the exemption. Our team can manage the Form 10 and tracking.