A STUDY OF CHARITABLE TRUSTS AND THE REASONS FOR

EXEMPTING IT UNDER INCOME TAX ACT

ABSTRACT

India follows the English concept of a trust as a vehicle under which

property is alienated from the original owners and held by a trustee for the benefit

of others. The law governing trusts is codified and contained in the Indian Trust

Act. 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 declare and accepted by

him, for the benefit of another, or of another and the owner. Public trust are

generally formed for charitable or religious purposes, and are not intended to do

commercial activities. A public charitable trust is one, which benefits the public at

large, or some considerable portion of it. While, the income from private trusts is

available to specified beneficiaries and not to the public at large. A charitable trust

is defined to include relief of the poor, education, medical relief, and the

advancement of any other object of general public utility. Promotion of sports and

games is considered to be a charitable purpose. It is well established fact that any

legislature contrary to Indian constitution cannot survive. We the people of India

by virtue of the preamble of the constitution of India have decided to unite in

Secular, socialist, republic union of India. It may be argued that if we have

constituted secular India how a legislature can encourage the religious activity by

rendering exemption from tax laws. However as per constitution of India state is

indifferent from the religions and can’t be religious bias. However India has

prosperous heritage of all the religions in the world viz. Hinduism, Islam, Jainism,

and Christianity etc. so, it is the duty of the state to preserve this heritage and

spread them as a matter of heritage. So, if the state tax the religious activities then

it will be tantamount to garbing down the rights of Indian Citizens. Hence, the

income tax act,1961 provides exemption to the income of Charitable and Religious

trusts. This paper aims to highlight upon the study on charitable trusts and its

reasons for exemption under the Income Tax Act,1961.

OBJECT OF RESEARCH:

This paper aims to elaborately discuss a conceptual framework for analyzing

the reasons for exempting tax upon charitable trusts. The conceptual framework

focuses on the distinction between religious trust and charitable trust under the

income tax act, registration procedures, classification of its income with reference

to the provisions of the act and the relevant provisions on exemption under the

Income Tax Act, 1961

HYPOTHESIS

Charitable trusts are the trusts which are formed with an objective of

providing relief to poor, education, medical relief, preservation of environment or

monuments, advancement of objects of general public utility etc. As the major

object of the trusts of this nature is to prove useful to the society or class of people

at large it may be exempted from taxation to some extent depending on the

relaxations provided by the taxation laws of the country.

SYNOPSIS

Introduction

CHAPTER - 1

Taxation of charitable Trust

CHAPTER - 2

Religious vis a vis charitable trust

CHAPTER - 3

Registration of Charitable trusts

Cancellation of Registration

CHAPTER - 4

Classification of Income of Charitable trusts

o Voluntary contributions

o Property held by Institutions

o Capital gains

CHAPTER - 5

Exemptions under Income Tax Act (S.80G)

Conclusion