Trust & NPO Quick Reference

Registration, compliance, forms, and filing requirements for charitable trusts and institutions

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Registration Process

Section 333 / Rule 181 - Getting registered

Two-tier registration process: provisional (3 years) then regular (5/10 years).

Step 1: Provisional
Form 104 - 3 years validity
Old: Form 10A. Requirements: Deed, no-objection, proposed activities, expected income.
Step 2: Regular
Form 105 - 5 or 10 years validity
Old: Form 10AB. Requirements: Tax return filed for 2 years, 85% application proven, audit clearance.

Processing: Assessing Officer issues Form 106 (provisional) or Form 107 (regular) order within 30 days.

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Annual Compliance Calendar

Critical dates for trusts
Date Deadline Item
31 May Form 113/114 - Donation statement filing
Before 31 Oct Form 112 - Audit report (if required)
31 October Form 135 - Return of income (with Form 112)
5-6 years before expiry Form 105 - Registration renewal application

Filing Order: Form 113/114 → Form 112 → Form 135. Do not reverse this sequence.

Key Requirements

Section 336-339 - Maintain 85% rule
  • 85% Application: Spend 85% of income annually on charitable activities (Sec 336)
  • Annual Audit: Form 112 required if income >threshold or specified activity engaged (Sec 354)
  • Separate Books: Maintain distinct books for charitable vs. commercial activities
  • Permitted Investments: Invest per Schedule XV (corpus/accumulation) or Schedule XVI (general)
  • No Benefits to Related: Strict penalty (100-200%) if benefits given to related persons (Sec 445)
  • Accumulation Limits: Max 5 years accumulation; set aside must match specific rules (Sec 342)
  • Transfer Pricing: Document all transactions with specified domestic entities (Sec 171-172)
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Complete Forms Reference

All trust-related forms mapped
Form 104
Provisional Registration Application
Old: Form 10A | Validity: 3 years
Form 105
Regular Registration Application
Old: Form 10AB | Validity: 5-10 years
Form 112
Statutory Audit Report
Old: Form 10B | Required if: Income threshold or activity engaged
Form 113
Annual Donation Statement (Trust)
Old: Form 10BD | Due: 31 May
Form 114
Annual Donation Statement (Institution)
Old: Form 10BD | Due: 31 May
Form 135
Return of Income for Non-Profit
Old: ITR-7 | Due: 31 October
View Full Mapper →
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85% Application Rule

Section 336 - Core compliance requirement

Trust must apply 85% of income received in India annually for charitable purposes to maintain exemption.

Allowed Applications
- Sums donated to registered charity in India
- Direct charitable/religious activity
- 85% of corpus donated to other registered NPO
NOT Allowed
- Depreciation on same asset (double claim)
- Set-off from prior years' excess
- Corpus donation without actual spending

Shortfall: If 85% not met, tax imposed on shortfall amount + interest (Sec 352).

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Permitted Investment Modes

Schedules XV & XVI - Where to invest

Accumulated income and corpus must be invested in approved modes only.

Investment Type Corpus Accumulation
Government securities
Fixed deposits (banks)
Mutual funds
Real estate (specified) Limited
Charity activities (spend) Limited

Key: Corpus invested in Schedule XV modes. Accumulated income per Schedule XVI (broader list).

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Penalties for Violations

Section 445 & 352 - Strict provisions
Violation Penalty Reference
Benefits to related persons 100% or 200% of amount Sec 445
Non-renewal of registration Tax on assets fair market value Sec 352
85% application shortfall Tax on shortfall + interest Sec 352
Non-filing of return Rs 5,000 (late fee) Sec 428
No audit when required 0.5% of receipts or Rs 1,50,000 Sec 446

Important: Related person penalty is stringent. Proper due diligence essential.

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Accumulation Rules

Section 342 - Income retention limits

Trusts may accumulate income for future charitable activities, but only within prescribed limits and timeline.

  • Duration: Max 5 years accumulation of income (can be extended)
  • Set-Aside: Must create distinct corpus/sinking fund for accumulated income
  • Investment: Accumulated funds per Schedule XVI (broad list available)
  • Carry Forward: Set-aside cannot be carried forward beyond 5 years without fresh direction
  • Specified Income: Income from commercial activities taxed separately at 30% (cannot be accumulated)
  • Prior Approval: Assessing Officer may approve longer accumulation on application (Sec 342(3))

Key Changes from Old Act

What's new under IT 2025
  • Form 10A → Form 104: Provisional registration form
  • Form 10AB → Form 105: Regular registration form
  • Form 10B → Form 112: Audit report for non-profits
  • Form 10BD → Form 113/114: Donation statement (split into trust/institution)
  • ITR-7 → Form 135: Return of income for non-profits
  • New Section 333-347: Consolidated trust exemption provisions
  • New Schedule XV: Permitted corpus investment modes
  • New Schedule XVI: General permitted investment modes for accumulated income
  • Stricter Related Person Rules: Penalties 100-200% (vs 50% before)
Rules Mapper →
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Taxable Income Components

Section 337 - What gets taxed
Income Type Tax Rate Taxability
Regular income applied (85%) 0% Exempt
Interest on deposits 30% Taxed
Dividend income 30% Taxed
Capital gains (long-term) 20% Taxed
Commercial activity profit 30% Taxed (specified income)
Excess over 85% threshold 30% Taxed

Computation: Taxable income = total income - 85% of applicable receipts (or set amount). Commercial profit taxed separately.

Annual Review Checklist

For trustees and finance teams
  • Verify 85% of income applied on charitable activities in India
  • Reconcile donation receipts with donors' 80G claims (Form 113/114)
  • Check accumulation doesn't exceed 5-year limit without renewal
  • Confirm all investments per Schedules XV or XVI (not otherwise)
  • Verify no benefits paid to related persons (declare if any)
  • Review commercial activity revenue (separate books maintained)
  • Check transfer pricing documentation (if domestic transactions)
  • Ensure registration renewal filed 6+ months before expiry
  • Validate depreciation calculations (85% rule doesn't allow double benefit)
  • Prepare audit report (Form 112) if required

⚠ Risk Area: Benefits to family members (related persons) attract highest penalties. Maintain complete documentation.

Related Tools

Rules & Forms Mapper → Section Mapper → Compliance Calendar →