Master in Accounts & high court Advocate
9615 Points
Posted on 18 June 2025
Taxability of AOP Trust Income The taxability of the AOP Trust's income depends on its registration status and the purpose of its activities.
Exemption under Section 11 If the AOP Trust is registered as a charitable trust under Section 12A or 12AA of the Income-tax Act, 1961, it may be eligible for exemption under Section 11. However, this exemption is subject to certain conditions, including: -
*Application of Income*: The trust must apply at least 85% of its income towards charitable purposes. -
*Accumulation*: The trust can accumulate up to 15% of its income for specific purposes.
Taxation of Dividend Income The dividend income of ₹230,000 from mutual funds is taxable in the hands of the trust.
However, if the trust is registered as a charitable trust, it may be eligible for exemption under Section 11.
Maximum Marginal Rate If the trust's income is not exempt under Section 11, it may be taxed at the maximum marginal rate.
This could be the case if the trust is not registered as a charitable trust or if it fails to meet the conditions for exemption. Exemption Limit There is no general exemption limit of ₹250,000 for AOP Trusts.
However, if the trust is registered as a charitable trust, it may be eligible for exemption under Section 11, subject to the conditions mentioned above [1].
Guidance To determine the tax liability of the AOP Trust, consider the following: -
*Registration Status*: Verify the trust's registration status under Section 12A or 12AA. -
*Application of Income*: Ensure that the trust applies at least 85% of its income towards charitable purposes. -
*Tax Audit*: Consider getting a tax audit done to ensure compliance with tax laws.