Trust Annual Compliance with their Due Dates
Trust Annual Compliance
In India, trusts play a vital role in managing property and wealth for a wide range of objectives. There are several types of trusts, including charitable trusts, private trusts, and public trusts, each established for specific purposes. Trusts are commonly used for personal estate planning, family wealth management, philanthropy, and public welfare activities.
Given their legal and financial significance, it is essential to understand and adhere to the regulatory and statutory compliance requirements applicable to trusts. Proper compliance not only ensures the trust’s legal validity but also safeguards its operational efficiency and credibility.
This comprehensive guide provides an in-depth overview of the annual compliance checklist for trusts in India, covering statutory obligations, filings, and best practices as prescribed under the Indian Trusts Act, 1882, along with other applicable laws and the latest regulatory guidelines. It is designed to help trustees and stakeholders maintain compliance and ensure the smooth functioning of the trust.
What is Trust?
A trust is an arrangement of a body where one party, known as the trustee, has the ownership of property and assets in concepts where the benefits will be rewarded to others known as beneficiaries. It can develop regarding a very specific purpose, and usually, there are two primary types of trust in India , namely charitable and religious trusts. There are also sub categories of types of trust in India like private and public trusts that one may consider to have been supporting very special purposes and having very specific needs in terms of trust annual compliance. This transfer is made under the applicant’s organisation’s entire annual turnover. Only a qualified Chartered Accountant can issue and certify a Turnover Certificate.
Benefits of Complying with Trust Annual Compliance
Complying with annual statutory and regulatory requirements offers several important advantages for a trust, including:
Reduces legal risks and penalties by ensuring adherence to applicable laws and regulations.
Ensures accurate tax reporting, helping avoid late fees, interest, and unnecessary penalties.
Builds credibility and transparency through proper financial disclosures and records.
Keeps the trust aligned with its objectives and stated purposes.
Enhances beneficiary confidence and satisfaction through accountable management.
Prevents fines, litigation, and regulatory action arising from non-compliance.
Simplifies trust administration by maintaining organized documentation and records.
Strengthens reputation among financial institutions, auditors, and legal authorities.
Supports long-term stability and adaptability by maintaining regulatory good standing.
Provides assurance to trustees, beneficiaries, and stakeholders regarding lawful operations.
Understanding the Trust Compliance Calendar in India
Some of the key trust annual compliance under the trust compliance calendar As per the Indian Trust Act 1861 are discussed below:
| Trust Annual Compliance | Description |
|---|---|
| Trust Annual Compliance in Income Tax | ITR has to be filed annually by the trusts. In most cases, the relevant form for charitable and religious trusts would be ITR-7. This form is to be used where there is income to be declared and exemptions are claimed under various sections of the Income Tax Act. Trusts which are not charitable or religious in nature may, however, have to file ITR-5. |
| Audit of Accounts | Under Section 12A of the Income Tax Act, trusts with annual income in excess of an income limit must have their accounts audited. The audit is to be carried out by a Chartered Accountant, and audited accounts are to be attached to the income tax return. |
| Form 10B | If a trust is claiming immunities under Sections 11 and 12, the trust is to file Form 10B. This form is an audited statement of accounts, certifying that the trust’s income is applied to charitable purposes to the standards laid down under the Income Tax Act. |
| Form 10 | Charitable trusts that wish to claim exemptions on their income to be applied for charitable purposes must fill Form 10. This form ensures that the trust adheres to the laws on the application of income for the benefit of charitable activities. |
| Form 3CD | Trusts that receive donations and wish to claim deductions of the donations are required to fill Form 3CD. The form contains information about the donations received and to ensure adherence to the laws on claiming tax deductions. |
Registrar of Trust Annual Compliance
- Yearly Filing: Several parts of India make it mandatory for trusts to file a yearly report to the Registrar of Trusts; this will include, among other matters, the activities done by the trust, financial statements of the trust, and annual compliance for trust with other regulatory requirements. Trust Annual Compliance varies from state to state.
- Particular State Requirements: Each state might have its own policy and rules regarding trusts. So it is essential that a trust manager should have the information on such state rules and adhere to the same so that the trust does not get a legal dispute.
Charitable Trusts and Section 12A Registration
Trust annual compliance norms require that all trusts registered under either Section 12A or 12AA of the Income Tax Act must follow guidelines in order to retain the registration already given to them. This includes keeping correct books of account, ensuring that the income is actually used for charity purposes, and filing the necessary forms and paperwork on a yearly basis.
Periodically, the trust might be asked to re-registration and information requirement with income requirement with income tax department. So, it will be updated for the status of trust and can be expressed if the reflection of activity or formation of trust is correct or not.
Maintenance of Account Records
- Books of Accounts:Â Detailed and correct books of accounts are expected to be maintained for every trust. Records of receipts, expenditures, and any other financial transaction should be included therein. Proper accounting will ensure transparency and help in the process of auditing.
- Minutes of Meetings:Â The minutes of the meetings, along with the decisions taken and resolutions passed, should be maintained by the trustees. Internal governance will require this record, which may also turn important during audits or inspections.
Legal and Regulatory Compliance
- Indian Trusts Act, 1882:Â A trust is also governed by the Indian Trusts Act, 1882. It deals with the proper formation and management of the trust. It should be in relation to the obligations and liabilities that must be performed by the trustees and about the management of the property entrusted.
- Other Statutory Requirements:Â Depending on the nature of the trust and its activities, there may be other statutory compliances, such as the FCRA in the case of trusts receiving foreign donations, or trust annual compliance with the Goods and Services Tax, if applicable.
Due Date for Filing ITR for Trusts
Trust Annual Compliance under Income Tax
To safeguard your trust from fines, penalties, and the risk of cancellation of tax exemptions under the Income Tax Act, 1961, it is essential to comply with all trust annual income tax requirements within the prescribed timelines. Timely filing ensures continued eligibility for exemptions and smooth regulatory compliance.
Due Dates for Trust Income Tax Compliance
| Particulars | Description |
|---|---|
| Income Tax Return (ITR) Filing | The due date for filing the Income Tax Return for trusts is generally 30th September of the assessment year. In cases where the trust is subject to mandatory audit, the due date may be extended to 31st October. |
| Filing of Other Mandatory Forms | Forms such as Form 10B, Form 10, and Form 3CD must be filed on or before the due date of ITR filing. Delayed filing of these forms may result in denial of exemptions and levy of penalties under the Income Tax Act. |
Key Compliance Reminder
Failure to file the income tax return or mandatory audit and declaration forms within the prescribed timelines can lead to:
Loss of tax exemptions under Sections 11 and 12
Monetary penalties and interest
Increased scrutiny by the Income Tax Department
Therefore, it is strongly advised that trusts maintain accurate records and ensure timely filing of all income tax returns and associated forms to remain compliant and avoid regulatory consequences.
