Trust Registration

Income Tax Return Filing For Trust In India

Want to know all about income tax return filing for trusts in India? You’ve found just the right article

District Mineral Foundation Trusts are exempt from taxation on income resulting from contributions made by leaseholders, interest on late payments, penalties, interest on funds, savings bank accounts, and excess funds invested in term deposits. All of these incomes are derived from leaseholder contributions to the foundation. It was notified on 10 September. It will apply to the assessment years 2018-2019, 2019-2020, 2020-2021, 2021-2022, and 2022-2023.Income Tax Return Filing For Trust In India

A Trust is a legal structure created to support and promote the growth and spread of charitable or religious causes. These entities are divided into two categories: public trusts and private trusts. They are given many tax incentives under the Income-Tax Act because they don’t normally participate in commercial operations. This time, let’s examine how Trusts should submit their IT returns and the advantages they may be eligible for. 

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. 

Religious and Charitable

Section 11 of the Income Tax Act grants several advantages to charitable and religious trusts that do not engage in commercial activities. The term ‘religious’ is quite ambiguous because there is no proper definition outlined in the laws.

Meanwhile, according to Section 2(15) of the Income Tax Act, a ‘charitable’ trust provides some help and relief to the poor or needy through education, medical relief, food, or even clothing. It also includes conservation and preservation efforts of monuments and the promotion and advancement of public facilities.

Activities that result in commercial or economic gain would be exempt from being considered charitable. Services that serve as commercial tenders will be regarded as charitable if and only if the following conditions are met:

(i) such activity occurs while being engaged in the advancement and promotion of public facilities;

(ii) the aggregate receipts during last year are never more than 20% of the total receipts the organization has received

To be exempted from paying tax, a trust must utilize a minimum of 85% of its 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.

Tax Rate for Trusts 

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

Taxable Income (2021-22) Tax Rate

 

Up till ₹ 2,50,000   

5%
₹ 5,00,000 – Rs. 10,00,000 20%
Above ₹10,00,000  30%

IT Surcharge for Trusts

On top of the levied income tax, if the Trust has an annual turnover that exceeds ₹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 ₹1 crore, ₹ 2 crores, and ₹ 5 crores the surcharge is calculated at a rate of 15%, 25% and 37% respectively on the total income amount. Once again, it is subject to marginal relief, and hence, the total amount payable as tax will not exceed the total amount payable as tax by an amount greater than the income slab. 

Education cess and higher education cess come up to 2% and 1% respectively, and this is to be added along with the already mentioned surcharge.

Income Tax Filing

Any Trust which earns more than ₹ 2.5 lakhs a year must file returns without fail as per the law. However, iIrrespective 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
  • Investor funds for the protection of investors
  • Venture capital fund
  • Debt funds
  • Trade unions
  • Body/Board/Trust/Commission
  • Business trusts

ITR-5/ITR-7 Form

Taxes for a Trust may be filed using Forms ITR5 or ITR7. The Income Tax Act must be enforced if the Trust earns more than 2.5 lakhs in a single year. In these circumstances, trusts may use 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 together electronically.

Due Date for Filing Income Tax Return

  • The deadline for filing returns if the Trust is required to have their books examined and audited by a licenced Chartered Accountant is September 30.
  • The deadline for filing Form 3CEB, which the Trust must complete in order to file its income tax returns, is November 30. This form becomes relevant if the Trust has engaged in multiple separate party transactions.
  • The Trust has until July 31 to file its IT returns if an audit of its books and accounts by a CA is not required.

Get in touch with our experts right away to file taxes for your trust and remain IT compliant without taking on any stress!

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