Trust is an important organization as far Income Tax Act is concerned. Therefore, I hereby analyze various provisions of the Income Tax Act 1961 relating to Trusts .Following are some of the important provisions:-

1. Sec 115 UA

Subject to the provisions of sec 111 A and sec 115, the total income of a business trust shall be charged to tax at the maximum marginal rate.

2. Definition of Business Trusts (Sec 2(13A)

Business trust means a trust registered as-

i.an infrastructure Investment Trust under the securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations,2014 made under the securities and Exchange Board of India Act,1992(15 of 1992)or

ii. a Real Estate Investment Trust under the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act,199

3. Sec 10(23C)

As per the above sec following incomes are exempted incomes

I. Any income received by any person on behalf of-

i. the prime minister’s National Relief Fund or PM CARES FUND or

ii. the prime minister’s Fund or

iii. the prime minister’s aid to students fund or

iv. the National Foundation for Communal Harmony or

v. the swachh Bharat Kosh,set up by the Central Government or

vi. the clean ganga fund

vii. the chief minister’s relief fund

viii. any university or other educational institution  financed by the government (above 50% of total receipts is government grants) and it stands not for profit Besides, if the the aggregate annual receipts of the person from such any university or other educational institution   exceeds 5 crore rupees ,exemption is not available .

ix. any hospital financed by the government (above  50% of total receipts is government grants) and it stands not for profit and which exits for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence. Besides, if the aggregate annual receipts of the person from such any university or other educational institution  exceeds 5 crore rupees, exemption is not available.

x. any other fund or institution established for charitable purposes (approved by the prescribed authority).

xi. any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes (approved by the prescribed authority).

 4. Charitable or Religious Trust.

Trust formed for charitable or religious purposes which are not intended to do commercial activities are allowed various benefits under the Income-Tax Act, inter-alia, exemption under section 11.

The term religious purpose is not defined under the Income-Tax Act. However, Section 2(15)​ of the Act defines “charitable purpose” to include relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility.

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless—

(i) such activity is undertaken in the course of actua​​l carrying out of such advancement of any other object of general public utility; and

(ii) the aggregate receipts from such activity or activities during the previous year, do not exceed 20% of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;

5. Exempted incomes of Charitable or Religious Trust.

Sec 11

A. income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property;

B. income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of fifteen per cent of the income from such property;

C. Income of a trust from voluntary contributions which shall form part of the corpus of the trust.

D. Capital gains .

a. Capital gain from the transfer of a capital asset held wholly for charitable or religious purpose

i. If the cost of new asset is equal to or greater than the net sales consideration, then the entire capital gain will be exempted.

ii. If the cost of new asset is lesser than the net sales consideration, then the amount representing cost of new asset reduced by the cost of old asset will be exempted

a. Capital gain from the transfer of a capital asset held in part only for charitable or religious purpose Proportion of the capital gain will be exempted.

E .Income from voluntary contributions (other than those received with the specific direction that they shall form part of the corpus of the trust) received by a trust created wholly for charitable or religious purposes shall be exempt from tax provided that the requirements of utilization and   the restriction in this regard under sec 11 and 13 are satisfied ——Sec 12(1).

6. Tax on Anonymous Donations.

The total income of an assesse includes any income by way of any anonymous donation, the income tax payable shall be the aggregate of :

i. tax @30 % on the aggregate of anonymous donations received in excess of the higher of the following namely:

A. 5% of the total donations received by the assesse, or

B. Rupees one lakh: and

ii. the tax with which the assesse would have been chargeable had his total income been reduced by the aggregate of anonymous donations received in excess of the amount referred to in (A) or (B),as the case may be.

7. Computation of Tax.

A. trust is chargeable to tax as per the slab rates which are applicable to an individual (not being a senior citizen or super senior citizen).

Author Bio

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Telegram

taxguru on telegram GROUP LINK

Review us on Google

More Under CA, CS, CMA

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

May 2022
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
3031