A Charitable and Religious Trust is a type of non-profit organization that is formed for the purpose of providing social and charitable services to the community. Such trusts are typically established with the aim of promoting education, religion, health, poverty alleviation, or any other charitable purpose that benefits the public.
The trust is managed by a group of trustees who are responsible for ensuring that the objectives of the trust are achieved. The trustees are appointed as per the provisions laid out in the trust deed and are usually individuals who have a good reputation and are committed to the objectives of the trust.
Charitable and religious trusts can receive donations from individuals, corporations, and other entities. These donations are used to support the activities of the trust and are eligible for tax exemptions under Section 80G of the Income Tax Act.
In India, charitable and religious trusts are governed by the Indian Trusts Act, 1882, and are required to be registered with the Registrar of Societies or the Charity Commissioner, depending on the state in which they are operating. They are also required to comply with the provisions of the Income Tax Act and other applicable laws and regulations.
Overall, charitable and religious trusts play an important role in promoting social and charitable causes, and are a vital component of the non-profit sector in India.
1. Charitable Trust
A charitable trust is a type of trust established to serve a charitable purpose or to benefit a charitable cause. The assets of a charitable trust are typically donated by a donor, and the trust is managed by trustees who are responsible for ensuring that the trust’s assets are used in accordance with its charitable purposes. Charitable trusts are often established to provide funding for research, education, healthcare, social welfare, environmental conservation, or other charitable causes.
2. Religious Trust
A religious trust, on the other hand, is a type of trust established to support religious organizations or activities. A religious trust may be established to support a particular religion or denomination, or to support a particular religious institution, such as a church, mosque, or temple. The trustees of a religious trust are responsible for managing the trust’s assets and ensuring that they are used to further the religious purposes for which the trust was established. Religious trusts may also be established to support charitable causes that are consistent with the religious beliefs of the trust’s founders.
3. What is ‘Charitable Purpose’ for Income Tax Purposes ? [ Section 2(15)]
Section 2(15) of the Income-tax Act defines charitable purpose for the purpose of the Act and includes relief of the poor education, medical relief and the advancement of any other object of general public utility.
Accordingly, charitable purposes can be classified under four heads –
(a) relief to the poor
(b) education
(c) medical relief
(d) preservation of environment (including water sheds, forests and wild life)
(e) preservation of monuments or places or objects of artistic or historic interest, and
(f) any other object of general public utility.
A purpose must, in order to be charitable, be directed to the benefit of the community or a section of the community, as distinguished from an individual or a group of individuals. Where the primary purpose of the settler is to benefit the members of his family and relations and only remotely and indirectly the general public, the trust is not a charitable trust. It has been held that a charitable purpose’ includes a ‘religious purpose’. Thus, the words ‘trust for charitable purposes’ would include even trust for advancement of religion.
The definition of the charitable purposes was enlarged by the Finance Act, 2011 by the addition of the following objects in its ambit:
- Preservation of environment (including water sheds, forests and wild life).
- Preservation of monuments or places or objects of artistic or historic interest.
4. Laws Applicable to Charitable Institutions/Trusts
- Indian Trusts Act, 1882
- Charitable & Religious Act, 1920
- WakfAct,1954
- Sikh Gurudwara Act, 1925
- Indian Trustees Act, 1866
- Religious Endowment Act, 1863
- Trustees’ & Mortgagees’ Powers Act, 1866
- Society Registration Act, 1860
- Companies Act, 1956, for trusts registered as companies u/s. 25 of the Act
Allied Laws:
- Transfer of Property Act, 1882
- Indian Registration Act, 1908
- Income Tax Act, 1961
- Foreign Contribution (Regulation) Act, 1976
5. Provisions Relating to Anonymous Donations & Gifts [ Section 115 BBC ]
A new section 115BBC has been inserted in the Income-tax Act, 1961 by the Finance Act, 2006 so as to provide that any income by way of anonymous donations received by a trust, fund, institution, etc. referred to in that section shall be included in the total income of the assessee, being the person in receipt of such income on behalf of the trust, fund, institution, etc. and shall be chargeable to tax at maximum marginal rate.
For the purposes of this section, ‘anonymous donation’ means any voluntary contribution referred to in section 2(24) (iia), where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. [Section 115BBC(3)]
The Taxation Laws (Amendment) Act, 2006 amended provisions of section 56 where gifts above specified limits received from specified persons are exempted. Further provision have been inserted to enlarge the scope of exemption. The exempted categories of gifts will include a local authority as defined in the Explanation to clause (20) of section 10; a fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23 C) of section 10; or from a trust or institution registered under section 12AA.
