Income Tax Return Filing for Trust In India 

Last Updated at: January 24, 2020
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Income Tax Return Filing for Trust In India

A Trust is an entity that is formed to assist and help in the development and propagation of charitable or religious purposes. They do not typically engage in commercial activities and are hence allowed several tax benefits as per the Income-Tax Act. This time around, let’s take a look at how Trusts should file their IT returns and what benefits they can avail. But before we should know trusts are segregated into two parts – public and private trusts. 

Tax Rate

Trusts are expected to follow the same tax rate that individuals who do not fall into either the Senior Citizen or Super Senior Citizen category, are subjected to as per the Income Tax Act. Here’s a look at the income tax rate for Trusts as per the 2018-2019 & 2017-18 stats for the sake of comparison.

Taxable Income (2018-19)                 Tax Rate

Up till Rs. 2,50,000                                 Nil

Rs. 2,50,000 – Rs. 5,00,000                     5%

Rs. 5,00,000 – Rs. 10,00,000                   20%

Above Rs. 10,00,000                               30%

 

Taxable Income (2017-18)                 Tax Rate

Up till Rs. 2,50,000                                 Nil

Rs. 2,50,000 – Rs. 5,00,000                     10%

Rs. 5,00,000 – Rs. 10,00,000                    20%

Above Rs. 10,00,000                                30%

File Your Income Tax Returns

IT Surcharge

On top of the levied income tax, if the Trust has an annual turnover that exceeds Rs 50 lakhs, then they are liable to pay a surcharge of 10% on the total income. But, a marginal relief system controls the surcharge, wherein if the income is higher than fifty lakhs, then the total amount payable shall not exceed the income amount that exceeds fifty lakh rupees. If the income exceeds Rs.1 crore, the surcharge is calculated at a rate of 15% on the total income amount. Once again, it is subject to marginal relief, and hence, the total amount payable as the tax will not exceed the total amount payable as tax by an amount greater than one crore rupees. Education cess and higher education cess comes up to 2% and 1% respectively, and this is also added along with the already mentioned surcharge.

Income Tax Filing

Any Trust which earns more than Rs.2.5 lakhs a year must file returns without fail as per the law. Irrespective of their income, the Trusts listed below are expected to file their Income Tax returns.

  • Research Associations
  • News Companies
  • Association or institution
  • Securitization trust
  • Investor protection fund
  • Core settlement guarantee fund
  • Institutions
  • Funds
  • Universities and Educational Establishments
  • Mutual Funds and Investor Funds for Protection of investors
  • Venture capital fund and Debt funds
  • Trade unions
  • Body/Board/Trust/Commission
  • Business trusts

Due date for filing Income Tax Return

  • If the Trust is expected to have their accounts checked and verified by a registered Chartered Accountant, then the last day for filing their returns is 30th September.
  • If the Trust is expected to fill form 3CEB in order to file their income tax returns, then the last date for doing so is 30th November. This form comes into the picture if the Trust has undertaken several distinct party transactions.
  • If the Trust does not need to get their records and accounts checked by a CA, then the deadline for submitting their IT returns is 31st July.

ITR-5/ITR-7 Form

Forms ITR5 or ITR7  may be used to file a Trust’s taxes. If the Trust earns more than 2.5 lakhs a year, then it must pay taxes as per the Income Tax Act. In such cases, rusts may utilise ITR5. However, if the Trust is filing tax returns because it falls under the categories listed in  Sections 139 (4A, 4B, 4C,4D,4E and 4F), then it may use an ITR7 to file the returns.

  • All Trusts must file electronic returns, and if the records of the Trust have to be verified by a registered CA, then both the tax return statement and a Digital Signature of the Trustee must be filed electronically together.

Religious and Charitable

Section 11 of the Income Tax Act provides several benefits to charitable and religious trusts which do not undertake any commercial activity. The term “religious” is quite ambiguous because no proper definition or boundary has been given for this term in the laws. Meanwhile, as per Section 2(15) of the Income Tax Act, a “charitable” trust is one that provides some help and relief to the poor or needy in the form of education, medical relief, food or even clothing. 

It also includes efforts taken to conserve and preserve the environment, monuments, promotion and advancement of public facilities. Carrying on activities that result in a commercial or economic gain would exempt such actions from being deemed charitable. Services which act as commercial tenders will be considered to be charitable if and only if:

  • (i) such activity occurs while being engaged in the advancement and promotion of public facilities;
  • (ii) the aggregate receipts during last year is never more than 20% of the total receipts the organisation has received
  1. Section 80G of the Income Tax Act allows tax deductions on donations people have made to Central/State Relief Funds, NGOs and other charitable institutions from their total taxable income. 
  2. To be exempted from paying tax, a Trust must utilise a minimum of 85% of their income for charitable/religious purposes. Money used to purchase a capital asset, repay loans or donation to another Trust are all clauses listed under Section 12(AA), and Section10(23C) and such payments are spared from IT. 

 

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Income Tax Return Filing for Trust In India 

897

A Trust is an entity that is formed to assist and help in the development and propagation of charitable or religious purposes. They do not typically engage in commercial activities and are hence allowed several tax benefits as per the Income-Tax Act. This time around, let’s take a look at how Trusts should file their IT returns and what benefits they can avail. But before we should know trusts are segregated into two parts – public and private trusts. 

Tax Rate

Trusts are expected to follow the same tax rate that individuals who do not fall into either the Senior Citizen or Super Senior Citizen category, are subjected to as per the Income Tax Act. Here’s a look at the income tax rate for Trusts as per the 2018-2019 & 2017-18 stats for the sake of comparison.

Taxable Income (2018-19)                 Tax Rate

Up till Rs. 2,50,000                                 Nil

Rs. 2,50,000 – Rs. 5,00,000                     5%

Rs. 5,00,000 – Rs. 10,00,000                   20%

Above Rs. 10,00,000                               30%

 

Taxable Income (2017-18)                 Tax Rate

Up till Rs. 2,50,000                                 Nil

Rs. 2,50,000 – Rs. 5,00,000                     10%

Rs. 5,00,000 – Rs. 10,00,000                    20%

Above Rs. 10,00,000                                30%

File Your Income Tax Returns

IT Surcharge

On top of the levied income tax, if the Trust has an annual turnover that exceeds Rs 50 lakhs, then they are liable to pay a surcharge of 10% on the total income. But, a marginal relief system controls the surcharge, wherein if the income is higher than fifty lakhs, then the total amount payable shall not exceed the income amount that exceeds fifty lakh rupees. If the income exceeds Rs.1 crore, the surcharge is calculated at a rate of 15% on the total income amount. Once again, it is subject to marginal relief, and hence, the total amount payable as the tax will not exceed the total amount payable as tax by an amount greater than one crore rupees. Education cess and higher education cess comes up to 2% and 1% respectively, and this is also added along with the already mentioned surcharge.

Income Tax Filing

Any Trust which earns more than Rs.2.5 lakhs a year must file returns without fail as per the law. Irrespective of their income, the Trusts listed below are expected to file their Income Tax returns.

  • Research Associations
  • News Companies
  • Association or institution
  • Securitization trust
  • Investor protection fund
  • Core settlement guarantee fund
  • Institutions
  • Funds
  • Universities and Educational Establishments
  • Mutual Funds and Investor Funds for Protection of investors
  • Venture capital fund and Debt funds
  • Trade unions
  • Body/Board/Trust/Commission
  • Business trusts

Due date for filing Income Tax Return

  • If the Trust is expected to have their accounts checked and verified by a registered Chartered Accountant, then the last day for filing their returns is 30th September.
  • If the Trust is expected to fill form 3CEB in order to file their income tax returns, then the last date for doing so is 30th November. This form comes into the picture if the Trust has undertaken several distinct party transactions.
  • If the Trust does not need to get their records and accounts checked by a CA, then the deadline for submitting their IT returns is 31st July.

ITR-5/ITR-7 Form

Forms ITR5 or ITR7  may be used to file a Trust’s taxes. If the Trust earns more than 2.5 lakhs a year, then it must pay taxes as per the Income Tax Act. In such cases, rusts may utilise ITR5. However, if the Trust is filing tax returns because it falls under the categories listed in  Sections 139 (4A, 4B, 4C,4D,4E and 4F), then it may use an ITR7 to file the returns.

  • All Trusts must file electronic returns, and if the records of the Trust have to be verified by a registered CA, then both the tax return statement and a Digital Signature of the Trustee must be filed electronically together.

Religious and Charitable

Section 11 of the Income Tax Act provides several benefits to charitable and religious trusts which do not undertake any commercial activity. The term “religious” is quite ambiguous because no proper definition or boundary has been given for this term in the laws. Meanwhile, as per Section 2(15) of the Income Tax Act, a “charitable” trust is one that provides some help and relief to the poor or needy in the form of education, medical relief, food or even clothing. 

It also includes efforts taken to conserve and preserve the environment, monuments, promotion and advancement of public facilities. Carrying on activities that result in a commercial or economic gain would exempt such actions from being deemed charitable. Services which act as commercial tenders will be considered to be charitable if and only if:

  • (i) such activity occurs while being engaged in the advancement and promotion of public facilities;
  • (ii) the aggregate receipts during last year is never more than 20% of the total receipts the organisation has received
  1. Section 80G of the Income Tax Act allows tax deductions on donations people have made to Central/State Relief Funds, NGOs and other charitable institutions from their total taxable income. 
  2. To be exempted from paying tax, a Trust must utilise a minimum of 85% of their income for charitable/religious purposes. Money used to purchase a capital asset, repay loans or donation to another Trust are all clauses listed under Section 12(AA), and Section10(23C) and such payments are spared from IT. 

 

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