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Taxation of TRUST

santhosh (CA) (636 Points)

25 November 2009

Hi There

There is a Welfare Trust which collects moderate fees for its services rendered and hence it cannot be said to have a chartiable purpose. Now the trust has a net surplus of Rs105200.Will this income be taxed @ 33.99% or will the trust be free from tax since the income is below exemption limit.

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Hitesh (CA) (459 Points)
Replied 25 November 2009

As per the Amendment made in Finance Act, 2008 u/s 2(15) for Chartitable Purpose .. . . .The fees received in cash or in kind or any other mode, if it is from any bussiness or activity not incidental to the objects of the trust, such income is not covered by the provision of Section 2(15).

Section 11(4) & (4A) provide that Income from business which is incidental to the main objects of the trust can only be considered as "income from the property of the trust".

Trust is normally subject to tax at the rates applicable to an individual. However this would hold good for incomes which are covered by Section 11.

Therefor the income in the instanty case would be chargeable to tax as normal bussiness income @ 30% plus Ed. Cess @ 3%. Surcharge would not be leviable as the bussiness income does not exceed Rs. 1 Crore.