Trusts are neither encouraged nor trusted not only in the Budget 2023, but in every budget

In the Budget 2023 the amendments, which are proposed and if enacted would definitely result in deterrent not only in the very functioning of the trusts that are in existence but also in formation of new Trusts by the affluents who have the mind-set to share their wealth. In general Trusts are created by philanthropic individuals or institutions for the welfare of people in general. Such Trusts are granted exemption in the Income Tax Act u.s. 12 for their income and deductions are given for the donations to the Donors u.s. 80G subject to certain conditions including the main condition viz. the benefits will go to Indian Citizens without considering cast, creed or colour. It is an accepted fact that such Trusts are generally doing the activities, which are nothing but welfare measures that are to be carried out by the Government. The Government should encourage formation of such Trusts and help them to continue to do their activities so long as they are following the norms set by the statute in formation and in rendering service to the public.

But in the recent past the Trusts are put to great difficulty right from formation to the day to day activities such as, formerly the grant of exemption was with local Commissioners and few years back the sanctioning power was shifted to the next higher level, for example, the power which was in Madurai was shifted to Chennai and in the last year it was shifted to New Delhi and all the existing Trusts were instructed to apply again afresh for registration. They are not allowed to carry forward excess spending in a year to the next year. Corpus Funds and other specific funds should necessarily be kept in separate bank deposits. Spending from borrowed funds will not qualify for consideration for the calculation of 85% spending.

Now in the Budget the following amendments are proposed:

• Application by a charitable or religious trust out of corpus, loans or borrowings shall be allowed when such amount is deposited back or invested in the corpus, or the loan or borrowing is repaid within five years. This is against the assurance given earlier that if the trust spends out of borrowing or out of corpus then in the subsequent years if the loan is repaid or invested in corpus it will be treated as application without any time limit. This will affect to a very great extent the trusts which have spent out of borrowing/corpus in earlier year on the genuine belief that they would get the benefit of application when the loan is repaid, or corpus is replenished and if they are not able to repay the loan or replenish the corpus within the short period of five years. If the Government is bent upon prescribing time period for repayment/replenishment ten years may be considered.
• Donations to other trusts (other than corpus donation), which were hitherto considered as application in full (100%) from 01.4.2023 onwards only 85% will be considered as application. This will seriously affect the trusts in ascertaining the application, because they will not be able to fill the gap of 15% of the donations given to other trusts.
• The due date of filing of Form 9A/10 are advanced by two months i.e. they are to be filed two months before the due date of filing of Return of Income. If they are not filed within the due date, they will not be able to get the benefit of accumulation of income and as a result they will be subject to tax. For example, for the Assessment Year 2024-25 the due date of filing of Return of Income is 31^st October 2024 and the due date of filing Form 9A/10 is 31^st August 2024. The rationale behind the advancement of the due date is not known. Majority of the trusts are managed by the trustees themselves and as per statute they are not eligible to get any salary and as such it is an honorary job and burdening them with unnecessary strict compliances would be counterproductive and as a result such trusts will not be able to continue their philanthropic activities. Filing of Form 9A/10 is a statutory compliance it will be more than sufficient if the are filed along with the Return of Income.

If the Government is bent upon seriously to curb the activities of the Trusts, which are linked with terrorist activities or with forced religious conversion, they should focus on such Trusts and should not curb the activities of the genuine trusts, which will hamper the growth of service minded Trusts in the long run in our country.