{"id":9179,"date":"2020-02-27T08:30:42","date_gmt":"2020-02-27T03:00:42","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=9179"},"modified":"2020-07-03T11:42:49","modified_gmt":"2020-07-03T06:12:49","slug":"what-is-the-procedure-of-income-tax-return-filing-for-trust","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/what-is-the-procedure-of-income-tax-return-filing-for-trust\/","title":{"rendered":"What is the procedure of Income Tax Return Filing for Trust?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">In India, <strong>Non-Profit Organizations (NPOs<\/strong>) can be registered as a Society, Trust or Section 8 Companies. The sole purpose of such organizations is to undertake public welfare activities for a charitable object. A Trust is an entity that aims to develop and propagate religious and charitable purposes. Such establishments do not engage in any commercial activities. Therefore, Trust avails several <strong>tax benefits under Income-Tax Act, 1961<\/strong>. This write-up will guide you about the process of <strong><a href=\"https:\/\/swaritadvisors.com\/income-tax-return-filing\">Income Tax Return Filing<\/a><\/strong> for Trust along with its benefits.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3183859dd2a\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3183859dd2a\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/what-is-the-procedure-of-income-tax-return-filing-for-trust\/#An_overview_of_Trust_in_India\" title=\"An overview of Trust in India\">An overview of Trust in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/what-is-the-procedure-of-income-tax-return-filing-for-trust\/#Types_of_Trusts\" title=\"Types of Trusts\">Types of Trusts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/what-is-the-procedure-of-income-tax-return-filing-for-trust\/#Eligibility_to_avail_Tax_Exemptions_under_Income_Tax_Act\" title=\"Eligibility to avail Tax Exemptions under Income Tax Act\">Eligibility to avail Tax Exemptions under Income Tax Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/what-is-the-procedure-of-income-tax-return-filing-for-trust\/#Taxpayers_in_Income_Tax_Return_Filing_for_Trust\" title=\"Taxpayers in Income Tax Return Filing for Trust\">Taxpayers in Income Tax Return Filing for Trust<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/what-is-the-procedure-of-income-tax-return-filing-for-trust\/#Procedure_to_File_Income_Tax_Return_for_Trusts\" title=\"Procedure to File Income Tax Return for Trusts\">Procedure to File Income Tax Return for Trusts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/what-is-the-procedure-of-income-tax-return-filing-for-trust\/#Due_Dates_for_Filing_Trust_Income_Tax_Return\" title=\"Due Dates for Filing Trust Income Tax Return\">Due Dates for Filing Trust Income Tax Return<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/what-is-the-procedure-of-income-tax-return-filing-for-trust\/#Penalties_imposed_on_Trusts_for_not_filing_ITR\" title=\"Penalties imposed on Trusts for not filing ITR\">Penalties imposed on Trusts for not filing ITR<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/learning\/what-is-the-procedure-of-income-tax-return-filing-for-trust\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"An_overview_of_Trust_in_India\"><\/span>An overview of Trust in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Trusts have been subsisting in the traditional roots of India since the ancient era. In those times, Dharamshalas, educational and medical institutions were built to serve the society. Later with the advent of the contemporary sphere, the term Trust came into existence with a broader aspiration.<\/p>\n\n\n\n<p>As per<strong> Section 3 of Indian Trust Act, 1882<\/strong> <a href=\"https:\/\/www.indiacode.nic.in\/handle\/123456789\/2327?view_type=browse&amp;sam_handle=123456789\/1362\">[1]<\/a>  \u201c<em>A Trust is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another or of another and the owner<\/em>.\u201d\u00a0It implies that a Trust is an arrangement wherein the Settlor (author of the Trust\/Trustor) transfers the property to another person (Trustee) for the benefit of a third person (beneficiary).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Trusts\"><\/span>Types of Trusts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Trusts are categorized in two forms which are as follows:<\/p>\n\n\n\n<ul><li><strong>Private Trusts<\/strong>&#8211; Indian Trusts Act, 1882, governs and regulates the functions of a Private Trust. It has the fundamental goal to safeguard the interest of those beneficiaries who are incapable of protecting their interest. In Private Trust, the beneficiary belongs to a narrow and minor specific group. In the Private Trust, the beneficiaries and their required shares can be ascertained.<\/li><li><strong>Public Trust<\/strong>-The Public Trusts are subdivided into <strong>Charitable and Religious Trusts.<\/strong> In the Public Trust, the beneficiaries make up a large or substantial general public. The Public Trusts vest the interest to beneficiaries who are uncertain and fluctuating bodies. The central focus of Public Trusts lies in educational, religious, scientific or charitable purposes.<\/li><\/ul>\n\n\n\n<p><div class=\"shadow4\">Public Trusts are more popular than Private Trust due to the ease of Registration. Moreover, the Charitable or Religious Trust gets an access to several tax exemptions and benefits under Income Tax Act.<\/div><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Eligibility_to_avail_Tax_Exemptions_under_Income_Tax_Act\"><\/span>Eligibility to avail Tax Exemptions under Income Tax Act<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Income Tax Act, 1961<\/strong> has set some conditions to grant tax exemptions to the Charitable Trusts. Let\u2019s look at the prerequisites to be <strong>eligible for tax exemptions<\/strong>:<\/p>\n\n\n\n<ul><li>The Trust must be registered as a Charitable Trust with the <strong>Commissioner of Income Tax<\/strong> which is eligible for exemption under the Act. Further, the Registration should be done as per the <strong>guidelines prescribed in Section 12A<\/strong>.<\/li><li>The property of the Trust should have been bound by a <strong>Trust Deed<\/strong> or other similar legal obligation.<\/li><li>The sole purpose of holding the Trust should be religious or charitable.<\/li><li>A Trust must not be formed for the benefit of any particular caste group or religious community.<\/li><li>The income of the Trust should not be used for the benefit of the Settlor or any close relative of the Settlor.<\/li><li>The Trust will get an exclusive tax exemption for the income which is applied to flourish charitable or religious purposes.<\/li><li>If a Trust\u2019s income exceeds the basic exemption limit, then it must submit the <strong>books of accounts for Audit<\/strong>. In such a case, the income refers to the total earnings of the Trust.<\/li><li><strong>Income Tax Return Filing<\/strong> is applied if the Trust exceeds the basic exemption limit. The due date to file the return varies on multiple factors associated with the Trust.<\/li><li>The Trust may earn accumulated income for the future investment of funds. In such a case, the accumulated income shall be invested separately. Also, the mode of investment should comply with the <strong>provisions of Income Tax Act<\/strong>.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Taxpayers_in_Income_Tax_Return_Filing_for_Trust\"><\/span>Taxpayers in Income Tax Return Filing for Trust<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Any Trust that has a gross total income of more than the basic exemption limit must <strong>file returns as per the Act<\/strong>. However, the Trusts listed below are required to <strong>file their Income Tax Returns<\/strong> irrespective of their income:<\/p>\n\n\n\n<ul><li>Association or Institution<\/li><li>News Companies<\/li><li>Research Associations<\/li><li>Investor Protection Fund<\/li><li>Securitization Trust<\/li><li>Institutions or Funds<\/li><li>Core Settlement Guarantee Fund<\/li><li>Universities or Educational Establishments<\/li><li>Mutual Funds<\/li><li>Investor Funds for the protection of investors<\/li><li>Venture Capital Fund\/Company<\/li><li>Business Trusts<\/li><li>Debt funds<\/li><li>Trade Unions<\/li><li>Authority\/ Board\/Body\/ Commission\/ Trust<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_to_File_Income_Tax_Return_for_Trusts\"><\/span>Procedure to File Income Tax Return for Trusts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>Charitable Trusts can file Income Tax online<\/strong> by using either <strong>ITR 5<\/strong> or <strong>ITR 7<\/strong>. The Trust is required to <strong>file ITR 5<\/strong>, if its gross income exceeds the basic exemption limit whereas the Trust is required to file ITR 7, if it falls under the category of mandatory <em>filing of\u00a0 Income Tax Return under Sections 139(4A), (4B), (4C), (4D),(4E) or (4F) of Income Tax Act<\/em>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Due_Dates_for_Filing_Trust_Income_Tax_Return\"><\/span>Due Dates for Filing Trust Income Tax Return<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here are some important deadlines that every Trust must keep in check with:<\/p>\n\n\n\n<ul><li><strong>September 30<\/strong>&#8211; When a Trust has to get its accounts audited by a CA under <strong>Income Tax Act<\/strong> or any other law.<\/li><li><strong>November 30-<\/strong> When the Trust is expected to <strong>file Form No. 3CEB<\/strong>. <strong>Form 3CEB<\/strong> applies to a situation wherein; the Trust has entered into several types of party transactions.<\/li><li><strong>July 31-<\/strong> If the Trust does not need to get its records or accounts audited by a CA, then this is the deadline for <strong>filing ITR<\/strong>.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Penalties_imposed_on_Trusts_for_not_filing_ITR\"><\/span>Penalties imposed on Trusts for not filing ITR<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If a Trustee fails to <strong>file an Income Tax Return<\/strong> after the due date, then he may have to bear the penalties mentioned below:<\/p>\n\n\n\n<ul><li><strong>Penalty for late Return Filing<\/strong>&#8211; The Trust has to <strong>pay a penalty of 5% of the tax<\/strong> due each month during which it has not filed the Return. It will continue to accrue until a <strong>maximum of 25% of the unpaid tax<\/strong>.<\/li><li><strong>Penalty for paying late Income Tax- <\/strong>If a Trustee fails to pay the tax on time, the <strong>IRS imposes a penalty of \u00bd or 1%<\/strong> of the unpaid amount for each month.<\/li><li><strong>Penalty for not providing information on time- <\/strong>In case, the Trustee does not provide a <strong>Schedule K-1<\/strong> to a beneficiary, the IRS shall impose a penalty of $100 for each time he fails to issue by the due date.<\/li><li><strong>Additional penalties-\u00a0<\/strong>The IRS may also impose some additional penalties for infringement like fraud, negligence or substantial understatement of tax.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><div class=\"shadow4\">Income Tax Return Filing is utmost essential for Trusts. It serves as a proof that the Trust possesses legal income and utilizes the same for the welfare of the society. Moreover, the Trusts should strictly adhere to the due dates prescribed under the Income Tax Act; otherwise, they will get penalized.<br><br>In case, you want  the legal assistance of competent Chartered Accountants in filing your ITR, contact Swarit Advisors. Our team of experienced Chartered Accountants can help you in the accurate computation of Income Tax, savings on tax etc.<\/div><\/p>\n\n\n\n<p class=\"text-left\"><b>Also, Read<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/input-tax-credit-under-gst-guide-on-itc-claim\/\">Input Tax Credit under GST<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In India, Non-Profit Organizations (NPOs) can be registered as a Society, Trust or Section 8 Companies. The sole purpose of such organizations is to undertake public welfare activities for a charitable object. A Trust is an entity that aims to develop and propagate religious and charitable purposes. Such establishments do not engage in any commercial [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":9182,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[416],"tags":[714],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9179"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=9179"}],"version-history":[{"count":9,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9179\/revisions"}],"predecessor-version":[{"id":11414,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9179\/revisions\/11414"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/9182"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=9179"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=9179"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=9179"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}