Charitable Trust Taxation Under ITA 2025: Section 12AB Registration, 85% Spending Rule

Charitable Trust Taxation Under explained: this guide covers what Charitable Trust Taxation Under means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Charitable trusts and institutions enjoy income tax exemption under the Income Tax Act 2025, provided they are registered under Section 12AB and comply with the 85% application of income rule. This guide explains the complete tax framework for trusts and NGOs.

Registration Under Section 12AB

All charitable trusts, NGOs (Section 8 Companies, Societies, Trusts) claiming income exemption must register under Section 12AB. Registration is valid for 5 years and must be renewed. New trusts: provisional registration for 3 years on application in Form 10A.

Conditions for Exemption

• Registration: Must be registered u/s 12AB
• 85% Application: At least 85% of income must be applied towards charitable objects during the year
• No benefit to specified persons (trustees, substantial contributors, relatives)
• Not for profit of specific religion/caste (some exceptions for religious trusts)
• Investments: Must be in specified modes only

Accumulation of Income

If a trust cannot apply 85% in the current year, it can accumulate the balance for up to 5 years if:

• Resolution passed to accumulate
• Form 10 filed before the ITR due date specifying purpose of accumulation
• Amount invested in specified modes

Voluntary Contributions

• Corpus donations (with specific direction to treat as corpus): not treated as income
• Non-corpus donations: treated as income, must be applied 85%
• Anonymous donations above Rs. 1 lakh (or 5% of total donations, whichever higher): taxed at 30%

80G Approval for Donors

Trusts registered under Section 12AB can separately apply for 80G approval. Donors to 80G-approved institutions can claim deduction of 50% or 100% (institution-specific) from their taxable income. 80G registration is in Form 10G.

ITR-7 Filing

Trusts, Section 8 Companies, and other entities claiming exemption under Sections 10/11-13 must file ITR-7 with detailed Schedule IE (income and expenditure), Schedule 12A (registration details), and Form 10B/10BB (audit report).