What is Charitable Trust Income?

A charitable trust income is taxable, but you can get tax exemption on the trust income according to sections 10-13 under the trust for the charitable or religious purpose on the income which comes from the property, religious places, and is derived from any property.  

Conditions for Claiming the Charitable Trust Income

The income tax includes the following in the definition of charitable purposes according to section 2(15). 

• Education
• Relief for the poor
• medical relief
• Yoga
• Protection for the monument and places or objects.
• Advancement of any other object for the use of the general public
• Protection for the natural environment. 
• The trust should not engage in any promotion of the caste or group of people. 
• Religious purposes are only permitted for religious groups, individuals, or communities. 
• If the trust receives any money related to the nature of business and commerce, then the accurate book of accounts should be maintained to claim the exemption. 

The donation that the charitable trust gets should not be used for the following given below: 

• For the founder. 
• For any significant donation.
• To any trust or manager.
• Relatives of the person which is mentioned above. 

Documents that are Required for Registration Under Section 80G and 12AB

Here are the following documents that you will need for the registration for the Section 80G and 12AB: 

For the registration of the Section 80G, you need to submit the following: 

• PAN card
• Donors list
• certificate of incorporation
• Form 10G
• list of the board of trustees
• utility bills copy.
• The list of the welfare activities
• All the documents which are related to the bank statements, IT returns, and books of accounts for the last 3 years. 
• MOA and registration certificate. 
• No objection certificate 
• You need to provide the trust deed. 

For the registration under Section 12AB, you will need to provide the following documents: 

• Your valid PAN Card
• Last 3 years' financial statements. 
• You need to submit the certificate of incorporation along with the MoA and AoA. 
• Documents for the creation of the trust and NGO. 
• Form 10A

How the Trust Income Should Be Spent to Get the Exemption

If any income is held by any charitable trust for any religious purposes, then the income can be claimed as exempt. In that situation, the charity trust needs to apply 85% of the income to charitable and religious purposes in India. 

Any income which is used for the following: 

• For buying any capital assets. 
• For any revenue expenditure. 
• Donation to another trust. 
• For repaying the loan for a capital asset purchase.  

However, if any trust takes money and uses it for charitable purposes, then it will not be treated as income from any charitable purpose.