My query is:
1. How to determine whether the trust is irrevocable or revocable trust?
2. Is it allowed for a trustee to donate immovable property to Trust
3. Can it be shown as gift,If yes then what are the differences between treating it as gift or donation?
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Donation of immoveable property by Trustee to Trust
Replies (1)
| These are three separate but related questions: 1. Revocable vs Irrevocable Trust: A trust is irrevocable if the trust deed explicitly states so, or if the settlor has no power to revoke/alter it. Under Section 80 of Indian Trusts Act, a trust is presumed revocable unless it is for consideration or unless the trust deed expressly states it is irrevocable. Tax implication: Income of a revocable trust is clubbed in the hands of the settlor (Section 61 of IT Act). For a charitable/religious trust registered u/s 12AB, irrevocability is a must. 2. Can a Trustee Donate Immovable Property to the Trust: Yes, a trustee (in his individual capacity as donor, not as trustee) can donate immovable property to the trust. The transaction must be documented via a registered gift deed (since immovable property transfer requires registration under Section 17 of Registration Act and must be via a registered instrument). The trustee must ensure there is no conflict of interest under Section 88 of Indian Trusts Act. 3. Gift vs Donation Treatment: - Gift: Voluntary transfer without consideration. If donor claims deduction u/s 80G, it is a 'donation.' If no deduction is claimed and it is a pure transfer of property, it is a 'gift.' - Income Tax: The trust does not pay tax on gifts/donations received if it is registered u/s 12AB. Corpus donations (with specific direction that it shall form part of corpus) are excluded from income computation. If shown as gift without corpus direction, it goes into income of the trust and is applied/accumulated under Section 11. - Practical Advice: Get a registered gift deed executed. Have the trust accept the property via a Board resolution. Show it as corpus donation in the books for maximum tax efficiency. |
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