A charitable trust is a type of entity formed to provide the public with religious or humanitarian facilities. Trusts that are formed for charitable or religious purposes and not intended to do commercial activities are allowed various benefits under the Income-Tax Act.
ITR-7 is filed when persons including companies are required to file their returns as per these section:
- section 139(4A): Income of Charitable and Religious Trusts
- section 139 (4B): Political Parties
- section 139 (4C): Scientific research institutions
- section 139 4(D): University, college or other institution
Introduction of Income tax return for Trust & Society
Charitable Trusts/Societies/Foundations are all covered under the head of NGO i.e. Non-Governmental Organisations that works for the social and economic welfare of the society. There are different forms of organisations that can be formed for raising out a hand for charitable activities.
‘Charitable purpose’ includes relief of poor people like education, medical relief, and the advancement of any object of general public utility. One of the benefit which NGOs have is Under Section 80G.
Eligibility for Exemption
- The trust should be registered with the Commissioner of Income Tax as a Charitable Trust which is eligible for exemption under the Act. The registration shall be made in accordance with the guidelines available in Section 12A of the Act.
- The property of the trust should be bound by a trust deed or another similar legal obligation.
- The purpose of holding the property should be a charitable or religious purpose.
- The trust should not have been created for the benefit of any particular religious community or caste group.
- The income of the trust should not be applied for the benefit of the settlor or any person who can be considered as a close relative of the settlor.
- An exemption will be available exclusively for the portion of the income which is applied towards charitable or religious purposes.
- In case the income of the trust exceeds the basic exemption limit, the trust should mandatorily submit the books of accounts for audit. Assessees may note that in this context, income refers to the earnings of the trust prior to allowing the exemption offered by the Act to charitable trusts.
- The trust should submit the return of income if the income of the trust exceeds the basic exemption limit. The due date for filing the return varies depending on the circumstances of the trust.
- The trust may earn income which is accumulated towards application in the future. In such cases, the income which is accumulated towards future application should be invested separately. The mode of investment should comply with the provisions of the Act.
ITR Form
What is the Structure of the ITR-7 Form?
The ITR-7 form has been divided into 2 parts and 23 schedules.
From AY 2023-24, a taxpayer has to also provide information on the details of registration or approval.
Part-A – General information
Part-B – Outline of the total income and tax computation with respect to income chargeable to tax.
- Schedule-I: Details of amounts accumulated/ set apart within the meaning of section 11(2) or in terms of third proviso to section 10(23C)/10(21) read with section 35(1) in last 7 financial years viz., previous years relevant to the current AY.
- Schedule IA: “Details of accumulated income taxed in earlier assessment years as per section 11(3)”
- Schedule-D: Details of deemed application of income under clause (2) of Explanation 1 to sub-section (1) of section 11.
- Schedule-DA: Details of accumulated income taxed in earlier assessment years as per section 11(1B).
- Schedule-J: Statement showing the investment of all funds of the Trust or Institution as on the last day of the previous year.
- Part A-BS : Details of Application and Sources of Fund as on 31st March 2022
- Schedule R: Reconciliation of Corpus of Schedule J and Balance sheet
- Schedule-LA: Details in case of a political party.
- Schedule-ET: Details in case of an Electoral Trust
- Schedule-VC: Details of Voluntary Contributions received.
- Schedule AI: Aggregate of income derived during the year excluding voluntary contributions
- Schedule A: Amount applied to stated objects of the trust/institution during the previous year from all sources referred to in C1 to C7 of this table
- Schedule IE-1, IE-2, IE-3 and IE-4: Income and expenditure statements as applicable
- Schedule-HP: Computation of income under the head Income from House Property
- Schedule-CG: Computation of income under the head Capital gains.
- Schedule VDA: Income from transfer of virtual digital assets u/s 115BBH
- Schedule-OS: Computation of income under the head Income from other sources
- Schedule-OA: General information about business and profession
- Schedule-BP: Computation of income under the head profit and gains from business or profession
- Schedule-CYLA: Statement of income after set off of current year’s losses
- Schedule PTI: Pass through Income details from business trust or investment fund as per section 115UA, 115UB
- Schedule-SI: Statement of income which is chargeable to tax at special rates
- Schedule 115TD: Accreted income under section 115TD
- Schedule 115BBI: Specified income of certain Institutions covered u/s 115BBI
- Schedule FSI: Details of income accruing or arising outside India
- Schedule TR: Details of tax relief claimed for taxes paid outside India
- Schedule FA: Details of Foreign Assets and Income from any source outside India
- Schedule-SH: Details of shareholding in an unlisted company
- Part B-TI: Computation of total income
- Part B1 : Applicable if exemption is being claimed u/s 11 and 12 or 10(23C)(iv)/10(23C)(v)/ 10(23C)(vi)/10(23C)(via) and where Part B3 is not applicable
- Part B2 – Applicable if exemption is being claimed under section 13A/13B and under sections 10(21), 10(22B), 10(23A), 10(23AAA), 10(23B), 10(23EC), 10(23ED), 10(23EE), 10(29A), 10(23C)(iiiab), 10(23C)(iiiac), 10(23C)(iiiad), 10(23C)(iiiae), 10(23D), 10(23DA), 10(23FB), 10(24), 10(46), 10(47)
- Part B3 : Applicable if total income chargeable to tax u/s twenty-second proviso to section 10(23C) or section 13(10)
- Part B-TTI: Computation of tax liability on total income Tax payments:
- Details of payments of Advance Tax and Self-Assessment Tax
- Details of Tax Deducted at Source (TDS) on Income (As per Form 16A/16B/16C/16D/16E).
- Details of Tax Collected at Source (TCS)
Documents Required for Income Tax Return for Trust
- Payment and Receipt Statement
- Details of all the members/directors of Charitable Institution
- Previous Statement, if filed any
- Pan card of the Charitable Institution
Additional Information for Income tax return for Trust & NGO
Eligibility to take Exemption-
The trust should be registered as Charitable Trust with the Commissioner of Income Tax which is eligible for exemption under the Act. The registration shall be made as per the guidelines laid under Section 12AA of the Act.
The property of the trust should be bound by a trust deed or another similar legal obligation.
The income of the trust should not be used for the benefit of the any person who is directly or indirectly related to charitable institution.
In case the income of the charitable institution exceeds the basic exemption limit, the trust should mandatorily submit the books of accounts for the purpose of audit.
Income derived from property held under trust or of an institution wholly for charitable/religious purpose is exempt, if 85% of the income is spent on the objects of the trust, during the year. If the amount spent is less than 85% of the income, the shortfall is taxable.
The trust should not have been created for the benefit or promotion of any particular religious community or caste group.
Due dates for filling Income Tax return
- September 30 – Where a Trust is required to get its accounts audited under the Income Tax Act or under any other law.
- November 30 – Where a Trust is required to file Form No. 3CEB. Form 3CEB will be required if the trust has entered into certain types of related party transactions.
- July 31 – Where Trust does not need to get its accounts audited.
Tax Rate Applicable
| Tax Slab | Rates |
| Up to 250000 | NIL |
| 250000-500000 | 5% |
| 500000-1000000 | 20% |
| Above 1000000 | 30% |
- Surcharge
- 10% of Tax when net income exceeds Rs 50lakhs
- 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 Cess
- 4% of Income Tax + Surcharge
Penalty of non filling Income Tax Return
If the trust or charitable institute fails to furnish the return of income or fails to furnish the same before the due date, then, the charitable trust shall be liable to pay a penalty under section 272A(2) which shall be Rs. 100 for every till the failure continues.
FAQs
In the case of the company, local authority, political party or association of persons, who can verify the income tax return?
The persons who can verify the income tax return in the following cases are:
Company– the Managing Director. In case for any unavoidable reason, there is no Managing Director, any other Director of the company can verify the return.
Local authority– the Principal Officer.
Political party- the Chief Executive Officer of such party, whether known as Secretary or any other designation.
Any other association- any member of the association or the Principal Officer thereof.
Any other person– that person or by some person competent to act on his behalf.
What are the details to be provided for claim of Exemption u/s 10(23C)(iv)/(v)/(vi)/(via) of the Act?
- Registration/approval details u/s 10(23C)(iv)/(v)/(vi)/(via) should be filled in Schedule Part A General
- Income should be disclosed in Schedule AI and Schedule VC as applicable
- Application of income – Revenue Expenditure & Capital expenditure should be disclosed in Schedule A.
- Exemption u/s 11(1A) claimed in Schedule A cannot exceed the net consideration disclosed in Schedule AI
- Audit Report in Form 10B/10BB to be complied as per the provisions of the Income Tax Act.
- Exemption amount allowable should be entered in the relevant column of Part B1 of Part B TI as applicable
- If exemption under third proviso to section 10(23C) – for Accumulation is claimed –Form 10 has to be filed within the due date for furnishing of return of income specified u/s 139(1).
- If the purpose of the trust is advancement of any other object of General Public Utility – total receipts and percentage of such activity {referred in proviso to section 2(15)} mentioned in Schedule Part A General (2) and percentage of receipts of such activities does not exceed 20% of total receipts of the trust/institution