TaxSaral

Section 346 · was Section 2(15) in the 1961 Act

General Public Utility Trusts — 20% Commercial Receipts Cap

Trusts registered under the 'General Public Utility' (GPU) object — the broadest charitable category — face a specific restriction: if receipts from commercial activities exceed 20% of total receipts during the year, the GPU object loses its charitable status for that year, making all income taxable.

Who it applies to: Trusts and institutions registered under the 'Advancement of any other object of general public utility' category — chambers of commerce, bar associations, trade bodies, and similar organisations.

Key points

  • GPU is the residual charitable category: trusts not fitting relief of poverty, education, medical relief, environment, or yoga
  • Commercial receipts (fees, subscriptions for services, trade fair revenues) must not exceed 20% of total gross receipts
  • If 20% limit is breached: GPU object is NOT a charitable purpose for that year → ALL income becomes taxable
  • The 20% limit is tested EVERY YEAR — a one-time breach can be corrected the following year
  • Education, medical relief, relief of poverty, environment, and yoga trusts are NOT subject to this 20% cap

Worked example

Chamber of Commerce Breaching the 20% Limit

A city Chamber of Commerce (GPU trust, registered under Section 332) has total receipts of ₹1 crore — ₹75 lakh from membership fees and ₹25 lakh from organising a trade exhibition.

Total gross receipts:                  ₹1,00,00,000
Commercial receipts (exhibition):      ₹  25,00,000

20% of total receipts:                 ₹  20,00,000
Actual commercial receipts:            ₹  25,00,000  ← EXCEEDS 20%!

Consequence: GPU object fails charitable test
ALL ₹1 crore income taxable at MMR:
Tax @ 30%:                             ₹  30,00,000

If commercial receipts were ₹18 lakh (18%):
  GPU object remains charitable ✓
  Income exempt if 85% applied
  Tax:                                 ₹           0

Result: Exceeding the 20% cap by just ₹5 lakh costs the Chamber ₹30 lakh in tax. GPU trusts must monitor commercial revenue monthly and restructure events if they risk crossing this threshold.

Related sections

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative; verify with a Chartered Accountant before filing.