Can corpus be a purpose under Form 10?

General
1

Hi sir. Form 10 is for long-term accumulation right? What constitutes a “specific purpose” for which we can accumulate funds for up to five years? Can we say “for our general corpus fund”?

2

Hi there,

You are correct. Form 10 is used to accumulate income for a future period, for up to five years, which could not be applied to charitable purposes in the current year. However, your understanding of “specific purpose” needs a slight correction.

What is a “Specific Purpose”?

A “specific purpose” must be a clearly defined and identifiable project or goal. The Income Tax Department requires you to be precise so they can track whether the funds are used for the stated charitable object. It cannot be a vague or general statement.

Good Examples of a “Specific Purpose”:

  • “Construction of a new wing for our school building.”
  • “Purchase of a medical ambulance for our health program.”
  • “Funding our three-year ‘Project Vidya’ for underprivileged children.”
  • “Acquisition of land for building a shelter home.”

Bad Examples (Not specific enough):

  • “For general charitable activities.”
  • “To meet future expenses.”
  • “For the upliftment of the poor.”

Can we say “for our general corpus fund”?

No, you cannot state “for our general corpus fund” as the specific purpose in Form 10. Here’s why:

  1. Corpus is General, Not Specific: A corpus fund is, by its nature, a general fund that provides long-term financial stability. Accumulation under Section 11(2) (using Form 10) is meant for a specific, planned expenditure within five years.
  2. Different Tax Treatments: Donations to a corpus fund and income accumulated via Form 10 are treated differently under the Income Tax Act. A corpus donation is exempt as capital, while accumulated income is an amount set aside for a specific future revenue or capital expense. Confusing the two is incorrect from a compliance standpoint.

In short, think of Form 10 as a way to tell the government: “We couldn’t spend this money this year, but we have a concrete plan to spend it on this specific project within the next five years.” Using it to build your general corpus is not the intended use and will likely be rejected by the assessing officer.

3

As per Section 11, the accumulation has to be for charitable or religious purposes and not for the general corpus fund. The purpose should be related to charity or religion.

4

Some more additions:

  1. The purpose would be the one for which funds were received and being accumulated for upto 5 years due to shortfall in application. Such accumulation is for long term projects generally
  2. The purpose cannot be sub granting to another 12A entity
  3. Repurposing of a specific purpose can now be permitted by the Department within the 5 year period
  4. The unspent accumulation would be taxable in the 5th year itself
  5. Form 10 has to be filed before the date of filing of ITR
  6. Accumulation has to be invested in Section 11(5) modes of Invesment

CS Sharad Bhargava