Compliances requires for the Charitable Trusts

A Trust is a kind of arrangement that originates from the settlement between the Settlor/Author (owner of the property) and the Trustee (the transferee) for the beneficial interest of a third person called Beneficiary. In this arrangement, the Author of the trust handover the administration of trust property to the Trustee for the benefit of a third person called Beneficiary.

In India, we classify trusts into two broad categories:

1. Private Trust - Where trust is created for the benefit of specified persons or class of persons.

2. Public Trust - Where trust is created for the general public and not limited to a selective group of persons. Public trusts are generally charitable in nature.

Compliance Requirements

1. Registration Requirements

• Trust Deed Registration
• PAN
• TAN
• FCRA Registration - For accepting foreign contributions.
• Registration under the Acts.
• RBI Approval - In case the beneficiary is a non-resident.
• GST Registration - In case annual turnover exceeds the prescribed limit of Rs. 40 Lakhs.

2. Filing of Income Tax Return

Any Trust with a gross total income of more than the basic exemption limit is required to file income tax returns mandatorily form ITR-5 and some specific trusts are required to file the income tax return, irrespective of their total income. The annual return of income in form ITR-7 is required to be filed every year. Form 10B is to be furnished by a charitable or religious trust or institution that has been registered u/s 12A or who has submitted an application for registration by filing Form 10A.

3. Reporting of Foreign Contributions

Every Trust which receives foreign contributions needs to register under Foreign Contribution Regulation Act, 2010 and submit a report, duly certified by a Chartered Accountant, and accompanied by an Income and Expenditure Statement, Receipts and Payments Account, Balance Sheet and annual account statement of separate account maintained to receive foreign contribution within 9 months of the closure of the financial year, to the Secretary, Ministry of Home Affairs, Government of India, New Delhi. A ‘Nil’ Report needs to be submitted if no such contribution is received during the last financial year.

4. Filing of TDS return and issuance of TDS certificates

Where any Private Trust is deducting tax at source for payment of salaries to the staff or employees (kept for managing the Trust Property), it needs to furnish certificates of TDS to the persons on whose behalf TDS was being collected. It should be done within 1 month from the date of closure of the financial year. Apart from this, quarterly TDS returns are also required to be filed.

5. Publication of accounts in newspaper

If the trust’s annual income or the receipts generated by the trust’s property has exceeded the amount of One Crore Rupees, then it is also essential for the trust to publish the accounts in the newspaper.

6. Filing of GST Returns

If trust is having GSTIN, then it is required to furnish GST returns monthly or quarterly (as may be applicable).

7. Audit of Accounts

Most private trusts are created for transferring benefits. Therefore, there will be income from that trust. So When the total income of a trust or institution is computed without giving effect to Sections 11 and 12 and exceeds the maximum amount not chargeable to income tax in any given financial year, the accounts for the year has to be audited by a CA. This requires, on or before the specified date referred to in Section 44AB, the report of such audit in Form 10B duly signed and verified by the CA. Due Date to file form 10B is 30th September.

Registration of a Private Trust in India

Documents required for Trust Deed Registration

1. Trust deed on stamp paper.
2. Two passport size photographs.
3. Self-attested copy of PAN and ID proof.
4. Signature of settler on all pages of trust deed.
5. Proof of registered office address (Electricity Bill/Water bill etc)
6. NOC from landowner with his identity proof.

Note:Registration for private trust is mandatory under Indian trusts Act 1882, when there is a transfer of immovable property, a certain amount of equity assets, etc.