Introduction

Charitable Trusts/Societies/Foundations are all classified as NGOs or Non-Governmental Organizations that strive for the social and economic well-being of society. A trust is a legal entity founded to assist in the establishment and propagation of charitable or religious goals. They do not normally engage in commercial operations and, as a result, are entitled to several tax breaks under the Income-Tax Act. This time, let’s take a look at how Trusts should file their IT returns and what benefits they might get. Section 80G provides benefits to non-profit organizations.

ITR Form

  • Forms ITR-5 and ITR-7 A Trust’s taxes can be filed using ITR5 or ITR7. If the Trust earns more than 2.5 lakhs per year, it must pay taxes under the Income Tax Act. Trusts may use ITR5 in such instances.
  • However, if the Trust is required to file tax reports because it falls into one of the groups indicated in Sections 139 (4A, 4B, 4C, 4D, 4E, and 4F),
    • Return made by a charitable trust (section 139 (4A)
    • Return based on a political party (section 139 (4B)
    • The agency’s return (section 139 (4C)
    • University and college returns (section 139 (4D)
    • Return through a business trust (section 139 (4E)
    • Return on investment (section 139 (4F)

The Returns May Then Be Filed Using An ITR7 Form

All Trusts must file e-returns, and if the Trust’s records must be verified by a registered CA, both the tax return statement and the Trustee’s Digital Signature must be filed electronically.

Procedure

Step 1: 

Complete the quick questionnaire provided by our team.

Step 2: 

Please provide us with all of the above-mentioned documentation.

Step 3:

We will compile financial statements based on the papers you provide us with, file your income tax return on time, and safeguard you from any penalties.

Step 4:

We will notify you further when you have filed your Income Tax Return and will also supply you with the return form and computation.

Eligibility

The following are the terms:

  • The trust should be registered with the Commissioner of Income Tax as a Charitable Trust, which is exempt under the Act.
  • A trust deed or another equivalent legal requirement should bind the trust’s holdings.
  • The trust’s income should not be utilized to benefit someone who is directly or indirectly affiliated with a charity organization.
  • Only charity or religious causes should be allowed to use the property.

Exemptions

  • An exemption will only be granted for the portion of income used for charity or religious purposes.
  • Revenue from property held in trust or from an institution solely for charitable/religious purposes is exempt if 85 percent of the income is spent on the trust’s objects during the year.

Tax Rate Applicable

Taxable Income

 Tax Rate
Up till Rs. 2,50,000 Nil
Rs. 2,50,000 – Rs. 5,00,000 5%
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

IT Surcharge For Trust Entity

  • 10% Tax, When net income surpasses Rs. 50 lakhs
  • 15% of Tax when net income exceeds 1crore
  • 25% of Tax when net income exceeds 2crore
  • 37% of Tax when net income exceeds 5crore
  • Health and Education:- 4% of Income Tax + Surcharge 

Due Dates For Filing Income Tax Return

  • September 30 – When a Trust is required by the Income Tax Act or any other statute to have its accounts audited.
  • November 30 – Where a Trust is required to file Form 3CEB that will be required if the trust has entered into certain types of related party transactions.
  • July 31 – The date on which Trust’s accounts do not need to be audited.

Failure To File A Tax Return Might Result In A Penalty

If the trustor charitable institute fails to furnish the return of income or fails to furnish it before the due date, the charity trustees shall be liable to pay a penalty of Rs. 100 for each day that the failure continues under section 272A(2).

Trusts That Were Expecting To File Their ITR

Any Trust that generates more than Rs.2.5 lakhs per year is required by law to file annual returns. The Trusts listed below are required to submit Income Tax Returns regardless of their income.

  • Research Associations
  • News Companies
  • Association or Institution
  • Securitization Trust
  • Investor Protection Fund
  • Core Settlement Guarantee Fund
  • Institutions
  • Funds
  • Universities and Educational Establishments
  • Investor Protection through Mutual Funds and Investor Funds
  • Venture Capital Funds and Debt Funds
  • Trade Unions
  • Body/Board/Trust/Commission
  • Business Trusts

Finaxis will offer you all of the necessary services and legal advice on the filing of Income Tax Returns, as well as guidance for other compliances. To file your income tax return, please contact us at https://finaxis.in/services/.