Trusts

Tax Exemptions

Following incomes are exempted from the application of income tax and no tax is payable on them.

1. Income derived from property held under trust wholly for charitable or religious purpose
   • To extent the income is applied for such purpose in India.
   • To the extent but not exceeding 25% of such income, the income is accumulated or set apart for application to such purposes in India.
2. Income derived from property held under trust partly only for charitable or religious purpose.
   • To the extent the income is applied for such purpose in India and;
   • to the extent but not exceeding 25% of such income, the income is accumulated or set apart for application to such purposes in India provided such trust had been created before 1.4.1962.
3. Income derived from property held under trust to the extent the income is applied for the purposes of the trust outside India, if direction to this effect has been issued by the Central Board of Direct Taxes by general or special order
   • in case of a trust created on or after 1.4.1962 if the trust was created for a charitable purpose which tends to promote international welfare in which India is interested or
   • in case of a trust created before 1.4.1952 if the trust was created for charitable and religious purposes.
4. Income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust.

Incomes Not Exempted

• The above said exemptions are not available if the income is transferred by the assessee in favour of another person without transfer of the property producing the income or when income arises from the property transferred by assessee by way of revocable transfer that is, a transfer which can be nullified by the person making the transfer at his will and convenience.
• The income of the trust being profits and gains of business of the trust is exempted only if the business of the trust is incidental to the attainment of the objects of the trust and separate books of accounts are maintained by the trust in respect of the business.
• Income accrued from the property held under a private religious trust, which does not endure for the benefit of the public, does not enjoy any exemption under the Income Tax Act.
• If a public charitable institution is crated for the benefit of any particular religious community or caste except the one created for the benefit of scheduled casts, backward classes, scheduled tribes or women and Children only no exemption is available.
• No exemption is available for the income of a public religious or charitable trust established after 1.4.1962 which enures as is applied directly or indirectly for the benefit of
  1. author of the trust
  2. any person who has made substantial contributions i.e., total contribution of more than Rs.50,000/-
  3. where author of trust is Hindu Undivided family, any member of such a family
  4. trustee of the trust
  5. any relative of the persons aforesaid as any concern in which the persons aforesaid have substantial interest.