Is it legally permitted to rent out a flat of a Trust with 12 AB status under leave and license agreement ?
Will the rent recived is taxable, if the amount is fully transferred to a corpus account ?
If 85% of the rent income recived is used for charity/religious purpose as per trust objectives, will the amount be taxable ?
In India, a Trust with 12 AB status (likely referring to a registration under section 12A of the Income Tax Act for tax exemptions for charitable trusts) can rent out its property. The legality of renting out a flat under a leave and license agreement would depend on the Trust's objectives, rules, and applicable laws. Generally, if renting out the property aligns with the Trust's objectives and is done in accordance with applicable laws and the Trust deed, it should be legally permitted.
If the rent received is fully transferred to a corpus account of the Trust and the Trust is registered under section 12A of the Income Tax Act, the taxability would depend on how the income is utilized. Income of a charitable trust is exempt from tax if applied for charitable purposes. Transferring to a corpus account doesn't necessarily make the income exempt; the utiization of funds for charitable purposes as per the trust]s objectives determines tax exemption.
For a Trust registered under section 12A, if at least 85% of the income is applied for charitable or religious purposes in India, the income is exempt from tax to thtat extent. So, if 85% of the rent income is used for charity/religious purposes as per the trust's objectives, that portion would likely be exempt from tax. the remaining 15%could be subject to tax depending on accumulation rules and other conditions.
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