Income Tax for Trust — Section 11, 12AB & Section 13 (FY 2026-27)

Updated: 3 June 2026 | Income-tax Act, 2025 | Sections 11, 12, 12AB, 13

A public charitable trust registered under Section 12AB of the Income-tax Act, 2025 is entitled to exemption under Section 11 on income applied for charitable purposes. At least 85% of income must be applied in the same year; up to 15% can be accumulated. A private trust does not qualify for this exemption and is taxed either at beneficiary rates (if beneficiaries are defined) or at the maximum marginal rate of 30% (if indeterminate beneficiaries).

Section 11

Core exemption for public charitable trusts
Requires 12AB registration. Without registration, trust income is taxed at maximum marginal rate (30% + cess).

Private Trust vs Public Charitable Trust — Tax Comparison

Feature	Public Charitable Trust	Private Trust
Beneficiaries	Public at large / section of public	Specific individuals (family members, etc.)
Section 11 exemption	Yes — with 12AB registration	No
12AB registration	Required	Not applicable
Taxation (registered)	Only un-applied income taxed	Taxed at beneficiary rate or MMR
Taxation (unregistered)	MMR — 30% + cess on entire income	MMR or beneficiary rate
ITR form	ITR-7	ITR-5 (or ITR-7 if 139(4A) applies)
80G eligibility	Yes — with separate 80G approval	No

Section 11 — Conditions for Exemption

Section 11 of the Income-tax Act, 2025 exempts income derived from property held by a trust for charitable or religious purposes, subject to these conditions:

The trust must have a valid Section 12AB registration before the start of the financial year (or provisional registration for new trusts)
At least 85% of income (from property held for charitable purposes) must be applied towards the objects during the year
Up to 15% may be accumulated without prior approval or condition
Income must be applied in India
The trust must not violate conditions of Section 13 — no benefit to specified persons
Accounts must be audited and Form 10B submitted if income exceeds ₹5,00,000 (before exemption)
ITR-7 must be filed before the due date (October 31 for audited trusts)

Section 12 — Voluntary Contributions

Section 12 of the Income-tax Act, 2025 treats voluntary contributions received by a charitable trust as income derived from property held for charitable purposes — thereby making such donations eligible for Section 11 exemption. However, corpus donations (donations specifically made with a direction that they form part of the corpus) are not treated as income at all — they are capital receipts and directly credited to corpus, without being subject to the 85% application requirement.

Section 12AB Registration — Process & Validity

All trusts must be registered under Section 12AB (replacing the old Section 12A) to claim exemption. Key points:

New trusts: Apply via Form 10AB on the IT portal — provisional registration for 3 years (Form 10AC issued within 1 month)
Final registration: After 3 years (when the trust has commenced activities), apply for regular 5-year registration (Form 10AD)
Renewal: Regular 12AB registration must be renewed every 5 years by filing Form 10AB at least 6 months before expiry
Documents required: Trust deed, PAN, registration certificate (for societies/Section 8 companies), audited accounts, activity report, list of trustees

The 85% Application Rule & Accumulation Under Section 11(2)

The 85% application requirement is computed on the income of the trust (not corpus). Voluntary contributions to corpus are excluded. If the trust is unable to apply 85% due to legitimate reasons, it can:

Accumulate income for up to 5 years for a specified purpose by filing Form 9A before ITR due date
Invest accumulated funds only in notified modes — government bonds, FDs in scheduled banks, etc.
Apply the accumulated amount within 5 years; unused accumulation after 5 years is deemed income and taxed

Section 13 — When Exemption Is Forfeited

Section 13 — Full exemption forfeited if:

Any income or property applied directly or indirectly for the benefit of a specified person — founder, trustee, substantial contributor (donated ≥ ₹50,000), or their relatives
Trust pays excessive salary / remuneration to trustees or founders above market rates
Property sold, leased, or loaned to a specified person below market value
Services availed from or provided to specified persons at non-arm's-length terms
Funds invested in prohibited modes — shares of closely held companies, certain other securities
Any income applied for political purposes or donated to a political party or electoral trust

When Section 13 is violated, the entire income of the trust for that year becomes chargeable to tax — not just the diverted portion. This is a key risk area for family-managed trusts.

Taxation of Unregistered Trust

If a trust is not registered under Section 12AB (or registration has lapsed), it loses Section 11 exemption. Its income is taxed as follows under the Income-tax Act, 2025:

Public charitable trust without registration: Taxed at maximum marginal rate — 30% plus surcharge and 4% cess on the entire income
Private trust with specific beneficiaries: Trustee taxed as a representative assessee at the rate applicable to each individual beneficiary
Private trust with indeterminate/unknown beneficiaries: Taxed at the maximum marginal rate (30%)
Discretionary trust: Taxed at 30% on the whole trust income

Section 164 — Representative Assessee Taxation

Section 164 of the Income-tax Act, 2025 deals with the taxation of trusts through their trustee as a representative assessee. The trustee files the return in a representative capacity. For a public trust, once registered under 12AB, this mechanism gives way to the Section 11 exemption regime. For private trusts, Section 164 applies and trustees are personally liable to pay tax on trust income as representative assessees.

Annual Compliance Checklist for Charitable Trusts

Compliance	Form / Action	Due Date
Income tax audit (if income > ₹5L)	Form 10B / 10BB	September 30 (AY)
ITR filing	ITR-7	October 31 (AY)
Accumulation of income (if > 15%)	Form 9A (filed with ITR)	Before ITR due date
Statement of donation receipts	Form 10BD	May 31 (of FY)
Certificate to donors	Form 10BE	May 31 (of FY)
12AB renewal (every 5 years)	Form 10AB	6 months before expiry
80G renewal (every 5 years)	Form 10AB	6 months before expiry

Frequently Asked Questions — Income Tax for Trust

Is a private trust taxed differently from a public trust?

Yes. A public charitable trust registered under Section 12AB is eligible for exemption under Section 11 — income applied for charitable purposes is not taxed. A private trust (for the benefit of specific individuals) does not qualify for Section 11 exemption. The taxation of a private trust depends on whether beneficiaries are determined (specific): if so, the trustee is taxed as representative assessee at the rate applicable to each beneficiary. If beneficiaries are indeterminate or unknown, the trust income is taxed at the maximum marginal rate (30%).

What happens if a trust loses its 12AB registration?

If a trust's 12AB registration is cancelled or expires without renewal, the trust loses its Section 11 exemption. Its income becomes fully taxable for that financial year at applicable rates. If the registration lapses, the trust must re-apply for fresh registration under Section 12AB before it can again claim exemption. Any income earned during the period of non-registration is chargeable to tax.

Can a trust accumulate income for more than 15% without tax?

A trust can accumulate income beyond the 15% basic limit under Section 11(2), but only for a specified purpose and for a maximum of 5 years. It must file Form 9A before the ITR due date, specify the purpose, and invest accumulated funds in notified instruments. If the accumulated income is not applied within 5 years, it is deemed to be income of the year of accumulation and taxed at the applicable rate plus interest.

What is Section 13 and when does it apply to trusts?

Section 13 of the Income-tax Act, 2025 specifies conditions under which the Section 11/12 exemption is forfeited. If any income or property of the trust is used directly or indirectly for the benefit of a specified person (founder, trustee, author, substantial contributor, or their relatives), the entire income of the trust becomes taxable for that year — not just the diverted amount. Section 13 is strictly applied and even indirect benefits can trigger full taxation.

Which ITR form does a trust file?

A trust registered under Section 12AB (or claiming exemption under Section 11) must file ITR-7. This form is for persons required to furnish a return under Sections 139(4A), 139(4B), 139(4C), or 139(4D). The due date is October 31 of the assessment year if the trust's accounts are required to be audited (income above ₹5,00,000). The trust must also file Form 10B (audit report) before the ITR due date.

Income Tax for NGO 12A & 80G Registration Section 80G Deduction ITR-7 Filing Guide Trust Registration

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