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‘Exemption’ Provisions For A “Charitable & Religious Trust”

Trusts and institutions established for charitable and religious purposes may be notified by the Central Government in the Official Gazette, so that their income is completely exempted from tax. In considering such cases, the Central Government will have regard to the objects of the trust/institution and its importance throughout Indian State or States. The eligible trust is required to make an application for grant/renewal of exemption on year to year basis and the exemption is allowed for assessment year/years as notified by the Central Government for such periods not exceeding five years including an assessment year or years commencing before the date on which the notification is issued.


1.     Conditions for availing exemption


Requirements/conditions for availing exemption under the Income-tax Act  are as under:


1.       Exemption under section 11 (1)(a) is available only to trust/institution which holds the property (from which income is derived) in trust wholly for charitable or religious purposes. It means that all objects of the trust should be for charitable or religious purposes.


2.       It is necessary that the property settled upon trust is held in trust. It would not be sufficient that the income is held in trust.


3.       The creation of trust must be wholly for charitable purposes or wholly for religious purposes. It should not be created for the benefit of any particular religious community or caste.


4.       The creation of the trust should not be for carrying on business for profit. The objects of the trust should be such as those which are charitable within the meaning of section 2(15) of the Income-tax Act (i.e., relief of the poor, education, medical relief, preservation of environment, preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility).


5.       The exemption is available not to the entire income from the property held in trust. It is available only to that part of the income which is applied to charitable and religious purposes in India.


6.       It is necessary to ensure through the trust deed that the income of the trust and of the property is utilised for charitable purposes in India.


7.       It is further necessary to ensure that the income or the property of the trust does not ensure for the benefit of the settlor (author) of the trust or his relatives as specified in the Explanation to section 13.


8.       All public trusts are required to be registered with the Commissioner by making an application in Form No. 1 OA within one year from the date of creation of the trust.


9.       If it is not possible to apply the whole of the income earned from the property held in trust to desired objects in the very year in which the income is earned, then such income should be accumulated or set apart for application to charitable or religious purposes in India in future years. However, it is permitted only up to 15% of the income earned in the relevant accounting period.


10.     Income in the form of voluntary contribution made with a specific direction that they shall form part of the corpus of the trust is exempt from tax.


What is ‘Charitable Purpose’ for Income Tax Purposes ?  [Sec. 2(15)]
Laws Applicable to Charitable Institutions/Trusts
Provisions Relating to Anonymous Donations & Gifts [ Sec. 11 5BBC ]
Formation Of A ‘Charitable & Religious Trust’
TRUST DEED of A ‘Charitable & Religious Trust’
Practical Tips on Drafting of Trust Deed of A ‘Charitable & Religious Trust’
Need for Registration of A “Charitable & Religious Trust”
Types of Registrations of A “Charitable & Religious Trust”
Procedure for Registration of Trust under the Indian Trusts Act, 1882
Registration of Trust under Sections 11 & 12 of the Income Tax Act, 1961
Cancellation of Registration of A “Charitable & Religious Trust”
Belated Filing of Application for Registration of A “Charitable & Religious Trust”
Practical Problem on Registration of a ‘Trust’ U/s. 12A
Creation of a Valid Charitable or Religious Trust
Income Tax Provisions For A “Charitable & Religious Trust”
‘Exemption’ Provisions For A “Charitable & Religious Trust”
Approval Of “Trust”  U/S 80G Of The Income Tax  Act. To Give Some Benefits To Its Donors.
Deduction To A Trust U/s 35AC
Power Of The ‘Trustees’ Of ‘Trust’
[Section 2(15)] : Exemption of Income of a Charitable & Religious Trust
[Section 11(2)] :      Accumulation or Setting Apart of the Trust Income for a Specific Purpose
[Section 11(4)] : Income from Business Undertaking of Property held under ‘Charitable Trust’ in Excess of the Income Shown in the Account
[Section 11(5)] : Forms or Modes of Money Accumulated or Set Apart of Trust Income Invested or Deposited
Trust Partly for Charitable or Religious Purpose and Partly for Other Purposes
[Section 11(1A)] : Capitai Gains Of The Trust For Charitable Purposes
[Section 12] : Income Of Religious Trusts Or Institutions From Voluntary Contributions
[Section 12AA] : Procedure For Registration Of A Trust Or Institution
[Section 13] : Income Of Charitable Or Religious Trust Does Not Qualify for Exemption u/s 11 or 12
Electoral Trusts Scheme, 2013 (Vide Not.No. SO. 309(E), dated 31.01.2013)
Functions Of Electoral Trusts - ET [Rule 17CA] [Vide Not.No. SO. 308(E), dated 31.01.20131.]
Important Points To Be Consider While Filing The Return Of A Charitable Trust Or Religious Institution:
Private Charitable Or Religious Trusts  ( Sections 161, 164 & 166 )
[Section 164(1)]: Where Shares Of The Beneficiaries Of a Private Discretionary Trust Are Indeterminate Or Unknown :
Property held under Trust Partly For Religious Purposes And Partly For Other Purposes :
ORAL TRUST [Sections 160(1)(v) and 164A ]
[Section. 167B] : Association Of Persons (AOP) And Body Of Individuals (BOI)
Tax Rates applied on Charitable or Religious Trusts
[Section-67A] :  Method Of Computing A Members Share In Income Of Association Of Persons (AOP) Or Body Of Individuals (BOI)
Provisions to Securitisation Trusts [As introduced by the Finance Act, 2013]
Definition of ‘Securitization Trusts’ as per SARFAESI Act.
Definition of ‘Securitization Trusts’ as per the SEBI Regulations
Definition of ‘Securitization Trusts’ as per the RBI Guidelines
Provisions relating to Tax on Distributed Income by Securitisation Trust
BUSINESS TRUSTS – Meaning & Provisions
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