Introduction:-

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, and exemption under section 11.

Section 2(15)​ of the Income Tax 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.

Permanent Account Number:-

Every charitable trust who is required to furnish return under Section 139(4A) is required to obtain PAN.

Registration of Trust:-

It is mandatory for a trust to get the registration under section 12AB of the Income-tax Act, 1961 so as to claim exemption under Section 11. A trust is required to apply for registration in Form No. 10A.

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Documents to be furnished along with application form?

The documents which are required to be furnished along with application Form No. 10A are as follows:

  • where the trust is created, or the institution is established, under an instrument, self-certified copy of the instrument creating the trust or establishing the institution;
  • where the trust is created, or the institution is established, otherwise than under an instrument, self-certified copy of the document evidencing the creation of the trust, or establishment of the institution;
  • self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;
  • self-certified copy of the documents evidencing adoption or modification of the objects, if any;
  • where the trust or institution has been in existence during any year or years prior to the financial year in which the application for registration is made, self certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up; note on the activities of the trust or institution;
  • self-certified copy of existing order granting registration under section 12Aor section 12AB, as the case may be; and
  • Self-certified copy of order of rejection of application for grant of registration under section 12Aor section 12AB, as the case may be, if any.

 Exemption to a trust

Income of a charitable and religious trust is exempt from tax subject to certain conditions. Some of the exemptions allowed to a trust are as under:

  • Section 11 provides exemption for income derived from property held under trust wholly for charitable or religious purposes to the extent such income is applied for charitable or religious purpose in India. However, this exemption shall be subject to certain conditions.
  • In view of Section 12, income in the form of voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes shall also be exempt from tax (subject to certain conditions).
  • Any voluntary contributions received by an electoral trust shall not be included in its total income (subject to certain conditions).
  • Income of an educational institute is subject to exemption under Sections 10(23C)(iiiab)/(iiiad)/(vi).
  • Income of a hospital or other institution shall be eligible for exemption if it satisfies the conditions prescribed under Sections 10(23C)(iiiab)/(iiiad)/(vi).

Taxability of Trusts:-

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). Tax will be increase as per the applicable surcharge and cess.

Return Filling & Due Dates of Trust:-

Return Filling

  • It is mandatory for a trust referred to in Sections 139(4A)​, 139(4C), 139(4D) and 139(4E) to file the return of income electronically.
  • Further, a trust (not covered in above provision) is required to file return of income electronically if its gross total income exceeds the maximum amount which is not chargeable to tax.

Due Dates of the Return Filling

A trust who is required to get its accounts audited under the Income-tax Act or under any other law October 31st of the assessment year
A trust who is required to furnish a report in Form No. 3CEB under section 92E November 30 of the assessment year
In any other case July 31 of the assessment year
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