Under the Income Tax Act inter-alia, exemption under section 11, trusts made for religious or charitable works not performing commercial activities can avail some benefits. Under the Income Tax Act, the term religious purpose is not defined. Charitable purpose is defined in Section 2(15) of the Income Tax Act. It incorporates the following :
Relief for the poor
Preservation of places or monuments or objects of historic interest o artistic
Preservation of environment including forests
Watersheds and wildlife
and any other object relates to general public utility.
The advancement of any object of general public utility should not be a charitable purpose. It includes any activity in the form of commerce or business, trade for a fee or cess or any other consideration. This is not related to the nature of application or retention or use of the income from such activity. It is not applicable for the following :
Such activity is performed as the course of activities that are carried out of the advancement of any object of general public utility.
The total receipts from such activity are not exceeded by 20% of the total receipts of the institution or trust engaged in such activity in the previous year.
Under section 139(4A), a charitable trust that needs to furnish return has to obtain PAN. Every individual who wants to enter into specific financial transactions, it is compulsory to have PAN.
A trust which is registered in India needs to submit copy of trust deed or copy of registration number certificate issued by Charity Commission with the PAN application.
Copy of Registration Certificate issued in the country where the applicant is there. This should be attested by any of the:
Apostille (for the countries that signatories to the Hague Apostille Convention, 1961)
Consulate in the country where the applicant is there
Authorized officials of overseas branches of Scheduled Banks that are registered in India
Copy of registration certificate that are issued in India or approval which is granted to establish office in India by Indian Authorities
Under the Income-tax Act, 1961 under Section 12AA, this is compulsory for a trust to obtain the registration. This helps to claim exemption under section 11.
There is not any time limit while applying for the registration. If application for registration of trust has been done on or after June 1, 2007, the exemption would be granted only from the financial year the application is submitted. Although exemption to any trust should be accepted regarding earlier assessment year for which pending and proceedings is to be claimed before the Assessing Officer. Activities and objects of the trust of that preceding assessment years must be same.
A trust is taxable according to the slab rates that are applicable for a person provided that he or she is not a senior citizen or super senior citizen.
Under Section 139(4A), 139(4C), 139(4D) and 139(4E), this is important for a trust to file the return of income. Besides, a trust is important to perform filling of income return when its gross total income crosses the maximum amount that is not chargeable to tax. As par the provisions of Sections 139(4A), 139(4C) or 139(4D), a trust must file its return in either ITR 7 or ITR 5. For a trust, it is important to complete filling return of income through electronic verification code.
One Click Business Solutions Private Limited files income return for different entities like Private Limited, Public Limited, Nidhi Company, Producer Company, Trust, Society etc. We have a dedicated team to submit tax and compliances accurately and in quickest turnaround time. Our motto is to use a combination of human touch and technology to offer premium business services to the clients.
The amount of income tax will be enhanced by a surcharge at the rate of 10% if total income is between Rs 50 lakhs and Rs 1 crore. Surcharge is subject to marginal relief (where income is more than Rs 50 lakh, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on complete income of Rs 50 lakh by more than the amount of income that exceeds Rs 50 lakh).
If the income crosses Rs 1 crore, then a surcharge on income tax will be pertinent at 15%. Once again, the surcharge is subject to be entitled for marginal relief (if income is more than 1 crore rupees, the total amount payable as income-tax and surcharge must not cross total amount payable as income-tax on total income of Rs 1 crore by more than the amount of income that exceeds Rs 1 crore).
The amount of income-tax and the related surcharge, is further raised by education cess and secondary and higher education cess computed at 2% and 1% of income tax and surcharge.
Any Trust with a gross total income exceeding Rs 2.5 lakhs must file income tax returns. Also, the following kinds of Trusts are required to file income tax return, regardless of gross total income.
Fund or institution
Association or institution
University or other educational institution
Investor Protection Fund
Venture Capital Company or venture capital fund
Core Settlement Guarantee Fund
Body or board or authority or trust or commission
Infrastructure debt fund
September 30 in case the trust is needed to obtain its accounts checked under the Income Tax Act or under any other law
November 30 in case the trust needs to file Form 3CEB. Form 3CEB will be essential if the trust is involved in certain types of associated party transactions.
July 31 in case the Trust does not require to get its accounts audited.
The income tax return of a Trust should be filed by using ITR 5 or ITR 7. If the Trust is needed to file income tax return because of taxable income which is more than Rs 2.5 lakhs, then ITR 5 can be filed. If the trust needs to file income tax return compulsorily under Sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F) of the Income Tax Act, then ITR 7 should be filed mandatorily.
It is mandatory for all Trust to digitally file income tax return. In case the Trust is required to get its accounts audited, then the income tax return should be e-filed along with the digital signature of a trustee.