Trust formed for charitable or religious purposes which are not intended to do commercial activities are allowed various benefits under the Income-Tax Act, inter-alia, exemption under section 11.
The term religious purpose is not defined under the Income-Tax Act. However, Section 2(15) of the Act defines “charitable purpose” to include relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility.
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless—
(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and(ii) the aggregate receipts from such activity or activities during the previous year, do not exceed 20% of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;
Is registration of a trust mandatory?
It is mandatory for a trust to get the registration under Section 12AA of the Income-tax Act, 1961 so as to claim exemption under section 11.
When a trust can apply for registration?
There is no time-limit to apply for the registration. However, if application for registration as trust has been made on or after June 1, 2007, the exemption would be available only from the financial year in which such application is made.
However, exemption to a trust could not be denied in respect of earlier assessment years (for which the proceedings are pending before the Assessing Officer) provided that objects and activities of the trust for such preceding assessment years were same.
Form to be used to apply for registration?
A trust is required to apply for registration in Form No. 10A
Documents to be furnished along with application form?
The documents which are required to be furnished along with application Form No. 10A are as follows:
1) Where the trust is created, or the institution is established, under an instrument, the instrument in original, together with one copy thereof; and where the trust is created, or the institution is established, otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof. If the instrument or document in original cannot conveniently be produced, it shall be open to the Principal Commissioner or Commissioner to accept a certified copy in lieu of the original.
2) where the trust or institution has been in existence during any year or years, prior to the financial year in which the application for registration is made, two copies of the accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up.
What is the tax rate?
A trust is chargeable to tax as per the slab rates which are applicable to an individual (not being a senior citizen or super senior citizen).
Surcharge: The amount of income-tax (as computed above) shall be further increased by a surcharge at the rate of 10% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).
Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess and secondary and higher education cess calculated at the rate of two per cent and one per cent respectively of such income-tax and surcharge.
Source- Official Income Tax Website of Government of India
The Income Tax Department on Monday launched its ambitious One Time Password (OTP) based e-filing verification system for taxpayers, thereby ending the practice of sending paper acknowledgement to its office in Bengaluru.
The facility can be accessed using internet banking, Aadhaar number, ATM and email.
According to the rules notified in this regard by the Central Board of Direct Taxes (CBDT) on Monday, any taxpayer, whose income is Rs 5 lakh or below per annum and has no refund he or she can straightaway generate the ‘Electronic Verification Code’ (EVC) for e-filing and validating their Income Tax Return (ITR) through their registered mobile number and e-mail id with the department.
However, this most simplified option, will be subject to certain “restrictions” which will be prepared by the taxman based on the concerned taxpayer’s “risk criteria and profile” in a case-to-case basis.
“This simply means that if the department has some adverse observation against the said PAN number with income less than Rs 5 lakh, he or she will not be allowed to do the verification directly through their email and mobile number alone and such cases will have to go through the other established procedures in this regard like linkup through Aadhaar database, internet baking or via the ATM,” a senior official explained.
These new measures would completely eliminate the need of sending the paper acknowledgement, called ITR-V, through post to the I-T Central Processing Centre (CPC) based in Bengaluru.
In the other options given, those taxpayers who have internet banking activated can do the e-verification of their ITR.
“The facility will be available on the internet banking website and the verifier (taxpayer) will use this facility using internet banking id, login password and transaction password,” the latest CBDT rules said.
Once logged in on the banking portal, the taxpayer will be sent the EVC to his mobile number provided in the official e-filing web portal of the department which they will put in their ITR for final submission.
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Section 80C provides for deduction of the amount paid as part payment or any installment in respect of home loan. Home loan should be for purchasing or constructing a residential house.
Who can claim deduction u/s 80C for repayments for purchase of property?
The deduction under section 80 C is available only to:
An individual andHindu Undivided Family
What are the conditions for claiming deduction under section 80 C for repayment of installments for purchase of House?
Deduction u/s 80C for repayments towards installments is available only if construction of house is completed. It is important to note that most of the companies are allowing deduction u/s 80C during construction period as well. But, majority of Tax professionals are of the opinion that deduction u/s 80C is available only if construction of house has completed. In order to avoid any tax complications or queries from Income Tax authorities, it is advisable to avail tax benefits u/s 80C only after the construction of house.
What is the Maximum amount of eligible deduction u/s 80C?
The maximum amount of tax benefits u/s 80C towards repayments of Home loan that can be claimed as deduction is Rs. 1, 50,000. However, the overall deduction allowed under section 80C including the other components such as PPF, LIC, NSC, pension schemes, repayment of home loan principal, etc. should also not exceed Rs. 1, 50, 000.
What payments qualify as deduction?
Any payment made by the individual or HUF towards the repayment of principal portion of the home loan for purchase or construction of a residential house property is eligible for deduction.
Only, the principal portion of the repaid amount can be claimed for deduction, but not the interest. The repayment includes instalments or part payments. Such payments can be made to or towards:
1. Development Authority: Every city has its development authority. A few are stated as follows:
Kanpur has Kanpur Development Authority (KDA)Delhi has Delhi Development (DDA) AuthorityLucknow has Lucknow Development Authority (LDA)
Nowadays,the development authorities have started allotting plots, houses, etc. on instalment basis. Therefore, any amount paid by the individual or HUF by way of part payment or installment of loan to such a development authority for allotment of houses are eligible for deduction.
2. Housing Board: Housing boards are established by States. A few are stated as follows:
Haryana has Housing BoardUttar Pradesh has Uttar Pradesh Housing BoardRajasthan has Rajasthan Housing Board
So, amount paid by the individual or HUF by way of part payment or installment of loan to such housing board for allotment of houses are eligible for deduction.
3. Co-operative Society: Many co-operative societies allot land or houses to its members. In turn, members have to make payments in part or installments over the years. Such part payments or installments qualify for deduction under section 80C.
4. Stamp Duty and other Expenses: When a property is transferred, a certain amount has to be paid in court as stamp duty and registration fee. Transfer of property also involves other expenses such as legal expenses. These expenses can also be claimed for deduction.
5. Home loan from Employer: It may be a case that an Employer may provide assistance to its Employee for acquiring a house property. The employee in turn will have to make payments to the Employer over a period of time for repaying the assistance. They are considered a part of deduction.
Please note that deduction under Section 80 C is not allowed if Employer is a Private Limited Company or a Proprietorship Firm or a limited Liability PartnershipFirm.
On the contrary, if the Employer is a Public Limited Company or a Public Sector Company or a University established by Law or a College affiliated to such University, such deduction is allowed to an individual.
6. Housing loan from Banks / Financial Institutions: You can borrow money from any Bank, NHB, LIC, Central Government or State Government or any Public Company carrying on the business of providing long term loan for purchase or construction of house property. Repayment of such loan qualifies for deduction under section 80C. Only, the principal portion of the repayment amount is eligible for deduction.
Although, the repaid amount qualifies for deduction, but it does not cover the following:
Payment of any amount for becoming a member of any co-operative societysuch as admission fee, initial deposit that one has to pay to become a member, orPayment for becoming a Shareholder of a Company like cost of share subscription, etc., orPayment for any repairs or renovation, addition or alteration to the house property is not eligible for deduction, orPayment of expenses for which deduction is allowed under Section 24, which means, interest on borrowed loan and municipal taxes.