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Taxation of trust

21 September 2016

A trust. X is the Settlor. X,Y and Z are trustee. Beneficiaries are General Public. It is a public trust. No profit motive. No profit or loss will be shared. Charitable exemption not yet obtained. whether this trust is to be charged to tax under slab rate or 30%.? If charitable exemption is obtained will it be taxed at slab rate or 30%, if it is not able to apply 85% of income and application to IT is not made for accumulation of deficit of 85% which is not applied. {There is no anonymous donation for the trust} If a trust is registered, and eligible for exemption under secton 11 and 12, it is required to file return of income only if the income exceeds the slab of Rs 250000.? Does it means that a registered trust is taxed at slab rate even if it is taxed at MMR had it not been registered for exemption. Siva

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2 Replies

saurabh kumar (Tax Consultant) (348 Points)
Replied 21 September 2016

Trust not registered under Income Tax Act will be taxable as AOP but sec 167 B is not applicable hence the basic exemption limit will be available for it.Even if The Trust is registered under Income tax Act it will have basic exemption limit for its income provided it does not include these:-

(i) Income for private religious purpose{sec-13(1)(a)}

(ii) Income for the benefit of particular religious community{sec-13(1)(b)}

(iii) Income for the benefit of persons specified in section 13(3) {sec-13(1)(c)}

(iv) Funds not invested in accordance with provisions of sec-11(5) {sec 13(1)(d)}

(v) Anonymous donation {sec-115}(exempt @ 5% or 100000 whichever is more)

If the above type of income prevails only that part will be taxed at MMR.

Yes if a Trust Whether it is registered for exemption under Income Tax Act or not it need to file return when its income exceeds Rs. 250000(without giving effect of the provisions of sec 11 and 12 ),but if organisation is registered u/s 10(21)/10(22B)/10(23A)/10(23B)/10(23C) then it is required to file return mandatorily.

Aishwarya (student) (32 Points)
Replied 21 March 2018

when a gratuity fund trust was not registered and it gets registered subsequently , will the income received before the registration will be exempt under section 10(25) in ITR 5?