Taxation of Charitable/Religious Trust

Charitable trusts are the trusts which are formed charitable purposes like- to provide relief to poor, medical relief, education,  preservation of environment/ monuments, the advancement of objects of general public utility, religious purpose, etc. Their taxation has always been a subject of concern. The income of such trust is taxed as per the provisions of section 11-13 of the Income Tax Act, 1961 rather than as per their relevant provisions. Let us discuss the major areas related to taxation of income of such charitable/religious trusts.

Income tax on Charitable Institution or Trust

We have discussed below income tax on various categories of income of charitable trust:

How should income be applied to be exempt

To be exempt, trust is required to apply at least 85% of its income to charitable or religious purposes in India. As per the definition provided under tax provisions, charitable purpose includes the following:

  • Relief of the poor
  • Education
  • Yoga
  • Medical relief
  • Preservation of environment or places or objects of artistic or historic interest.

Where should accumulated income be invested?

Such accumulations must be through the following modes of investment:

  • Investment in government saving certificate/UTI
  • Deposit in post office savings bank/scheduled bank/co-operative bank
  • Investment in IMP (immovable property)
  • Investment in any security for money created and issued by the CG or SG
  • Company debentures fully and unconditionally guaranteed by CG or SG
  • Investment or deposit in the public sector company
  • Deposit with or investment in bonds of a financial corporation or public company engaged in providing long term finance for India‚Äôs industrial development

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