| Question And Answer | |
|---|---|
| Subject: | taxability of a trust carrying on business activity |
| Category: | Income-Tax |
| Querist: | seetharaman |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | charitable trust, private discretionary trust, Taxation of Trusts |
| Date: | June 18, 2022 |
Respected sir,
A charitable trust registered u/s 12A(a) of the Act, now carrying on business activity having in excess of 20% of gross receipts wants to forfeit exemption u/s 11 . what is the itr form to be used? taxability is on net receipts (after expenses) or on grosss receipts , what is the rate of tax ?
Pl elucidate
As we understand, the Charitable Trust is not satisfying the conditions as per section 2(15) of the Income Tax Act, 1961 (Act), and hence wishes to forfeit its exemption under section 11 of the Act. The Income would be business income and the taxability would be on net basis at Maximum Marginal Rate.
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Expenditure in the nature of charge on income will be allowed, whereas application for charitable objects will not be allowed as deduction while computing business income. Application can be out of the profit after tax.