A trust is a relationship where the first party gives the right to own property to the second party for the benefit of the third party. The first party is called the trustor, the second party is called the trustee and the third party is called the beneficiary. A charitable trust is a type of trust where the beneficiaries consist of a community or a section of a community. That community generally belong to the disadvantages members of the society.
As the purpose of the charitable trust is...well, charitable, the government has given it some tax exemptions. In this post, we are going to discuss the sections under which charitable trusts can enjoy tax exemptions.
Charitable Trust enjoying Tax Exemptions under Section 10
Charitable trust with the purpose to promote any of the following causes can enjoy Tax exemption under Section 10 of the Income Tax Act:
- Scientific Research
- Khadi and Village industries
- Certain professions that promote culture, education and scientific research
- Religious institutions
Charitable Trust enjoying Tax Exemptions under Section 11
Under Section 11 of the Income Tax Act, any income or profit gained by the charitable trusts is not taxable if and only if those profits or incomes are applied to further the non-profit causes that those charitable trusts represent.
Charitable Trust that can enjoy tax exemptions under Section 11 and Section 12
Following are the charitable trusts eligible of enjoying tax exemptions under Section 11 and Section 12:
- Trusts that are only created to be charitable and nothing else.
- Trusts that are created before April 1962 and are only focused towards charitable goals
- Trusts that are created before April 1962 and are authorized by special and general order of the Board, and are only focused towards charitable goals
- Trusts that are created on or after April 1962 and are only focused towards promoting India on the international stage.
- Trusts that are created to benefit the reserved classes aka scheduled casts, scheduled tribes, women, children or backward classes.
Charitable Trusts are societies that exist to earn income and focus that towards charitable goals only. Therefore, the government promotes them by providing them tax exemptions. If you want to start your own trust, contact our experts.