Mission Statement

All our endeavors to serve our clients in their best interest, ensuring that our service adds value. We strive to equip ourselves with knowledge and skills which help us in achievig this objective.






What is a trust?

Trust in the normal course is referred to as the confidence which one person reposes in another person to whom he transfers the property with an obligation that the funds so generated therefrom shall be utilised for the charitable and religious purposes .

How are the trusts normally created?

Trusts are created when the settlor of the property transfers a property to the trustees for its usage in the public purposes.

Four essential conditions are necessary to bring into being a valid trust.

  1. The person who creates a trust (settlor) should make an unequivocal declaration binding on him.
  2. He must transfer an identifiable property under irrevocable arrangement and totally divest himself of the ownership and the beneficial enjoyment of the income from the property .
  3. The objects of the trust must be defined and specified.
  4. The beneficiaries are specified.


What is the tax treatment of the income of the private religious trusts and public religious trusts?

The income of the wholly religious trusts shall be exempt from income tax . The income of a private religious trust not ensuring to the benefit of the public at large shall not be exempt from tax.


What is the distinction between a public trust and a private trust?

The essential distinction between a public and a private endowment (trust) is that the beneficial endowments vests in an uncertain and a fluctuating body of the persons either the public at large or some considerable portion of it answering a particular description. On the other hand , in a private endowment the beneficiaries are definite and ascertained individuals .


What is meant by accumulation of funds by trusts?

Trusts have an option of accumulating (setting apart), some of the funds received from the voluntary contributions, in every previous year, for certain purposes.

The tax advantage is that the part of the contributions so set apart for the accumulation shall never be considered as the income for the previous year; accordingly, the expandable amount for the charitable purposes shall be reduced.


What is the procedure of obtaining permission for accumulation of funds under the Income Tax Act?

The Trust(s) is required to apply in Form 10 under the Income Tax Rules specifying the objects for which the accumulated sums shall be applied. The filing shall be within the time allowed for the filing of its income tax return.

Whether stating general purposes will suffice, or specific objects are required to be stated, has been a subject of dispute and different courts have adopted different stands.


What incomes  are not included for computation of taxable incomeof a trust/ society?

Following incomes are not to be included in the income of the trusts /society:

  • Income derived from the property held under trust wholly for the charitable and religious
  • purposes actually spent in these purposes in India .
  • Income set apart to the extent it does not exceed 25% of the total income from the property.
  • In case of trusts created before 1/4/61 , the income derived from the property held under trust partially for the charitable and religious purposes which has been actually spent in India .
  • In the above case , the income being set apart to the extent not exceeding 25% of the income from such property.
  • The income as derived by a trust created after 1/4/52 and spent out side India for the charitable purposes . These trusts shall be specified by the CBDT.
  • In case of the trusts created before 1/4/52 , the income is allowed to be spent out side India for the charitable and religious purposes.
  • Income by way of voluntary contributions towards the corpus of the trust.


Whether the amount donated to other charitable trusts shall be considered for arriving at the amount spent for charitable purposes within the meaning of sec. 11(1)(a) of the I.T. Act, 1961?

As per certain case laws, when a Charitable Trust donates its income to another Charitable trust, the provision of Sec. 11(1)(a) relating to the application of income to that extent can be said to have been met.


Please define the significance of the word Corpus from the viewpoint of Income Tax provisions.

‘Corpus’ has not been defined either in the Income Tax Act or in the Societies Registration Act, 1860. Ordinarily, ‘corpus means body of law or collection of writings.

The significance : Under sec. 11(1)(d) of the Income Tax Act, the income from the voluntary contributions towards the corpus of the trust or the institution is not to be included in the computation of income.

Therefore to the extent of the moneys received towards corpus, the trust or the institution is not under obligation to spend at least 75% of this moneys in the year of its receipt as provided in Sec. 11(1)(a) of the I.T. Act.


How does a trust or institution create a Corpus?

Before the funds from any donor are received towards the corpus, it is advised that the Trust should provide for the creation of a corpus funds in its Memorandum. It may be noted that in case the trust wishes to create a corpus out of the surplus funds available during the financial year, this can be achieved by applying to the concerned Assessing officer within the time of filing of its return.

It is to be noted that the donor should specifically mention that the funds so donated by him are towards the corpus of the funds.


What are the consequences in case the society/ trust or the institution does not avail the registration under the Income Tax Act?

The income so received by way of voluntary contributions either to Corpus or otherwise shall be considered and the expenses so incurred shall be allowed to compute the taxable income.

The income so derived shall be assessed in the status of the Associations of persons. The taxability of this income is generally done at the maximum rates of tax.

The following benefits are lost in case of non registration of the society.

  • Setting apart up to 25% of the income so received during the year.
  • Accumulation of the funds even exceeding 25% of the income received for the specific purposes .
  • Losing the exemption of the voluntary contributions received towards the Corpus of the society.


What is the correct treatment of accounting  for the grants with specified end objectives received from the donor agencies (from the Income Tax angle)?

This issue was addressed in a particular case and the following was prescribed:

  • The tied up grants received for the end objectives shall be credited to the Donor agency’s account
  • The Donor account shall be debited with the amount of the expenses incurred .
  • Any non refundable credit balance in the personal account of the Donor shall be treated as income in the year in which such non refundable balance was ascertained.

The major advantage coming from this accounting treatment is that the society /trust need not comply with any of the conditions as prescribed in Sec. 11/12/12A etc.

An alternative treatment is the usual way of crediting the Income side with the amount of grants received and then complying with the condition of expending at least 75% of the amounts of these grants.

Whether the society/ Trust can adjust the deficit from the previous year against the funds received during the year for the purpose of computing the quantum of application of funds u/s 11(1)(a) of the I.T. Act?

Once it is proved that the deficit has arisen due to the expending of the funds for charitable and the religious purposes, the deficit so brought forward can be treated as the application of funds in the subsequent year. This is despite the fact that there is no enabling provision existing in the I.T. Act.

In case the trust also takes a loan in a particular year and spends the amount so raised, the expenses so incurred shall be taken as the application of income in the year of repayment of the loan.


What are the powers of the Commissioner of Income Tax relating to the registration of the trusts?

The commissioner has the power to examine the documents of incorporation of the trusts and also the objects for which the trust is created. An order denying registration has to be a speaking order. This view has been endorsed by the judiciary.


What are the requirements to claim the tax exemption in case of the income from the business run by a trust?

Sec. 11(4A) of the Act specifies that in order to claim the tax exemption under Sec. 11 and 12 , the following conditions are required to be satisfied.

  1. The business from which the income representing the profits and gains from Business and Profession is derived, is incidental to the attainment of the objectives of the trust.
  2. Separate books of accounts are maintained by the trust in respect of such business.


What is a religious endowment and whether it can be a private religious purposes?

Ans. Endowments are defined to be the dedication of property by gift or devise to religious or charitable purposes. Religious endowment is one which has for its objects the establishment, maintenance or worship of an idol or deity or any object or purposes subservient to religion. In case, the religious endowments are created for a particular family deity, these become Private endowments. There can be private endowments for religious purposes but there can not be private endowments for the charitable purposes.

What is a public temple and how it is different from the Private temple?

Ans. A public temple is one where a considerable portion of the public or a section thereof has a beneficial interest. The main characteristics for a public temple is that it is intended for the use of the public at large or a specified class who are entitled for the worshipping of the idol.