What is a Trust?

A trust is a legal arrangement in which one party — the settlor — transfers assets to another party — the trustee — to hold and manage for the benefit of one or more beneficiaries.

Governing Laws in India

• Private Trusts – Governed by The Indian Trusts Act, 1882

• Public Charitable/Religious Trusts – Governed by The Charitable and Religious Trusts Act, 1920, and state-specific acts (e.g., The Bombay Public Trusts Act, 1950)

Key Parties in a Trust

• Settlor / Grantor – Creates the trust and transfers assets.

• Trustee – Manages assets per the trust deed and acts in the best interest of beneficiaries.

• Beneficiary – Receives the benefits from the trust assets.

Why Annual Compliance Matters for Trusts

Annual compliance safeguards a trust’s legal validity, credibility, and operational efficiency. It ensures transparency, avoids penalties, and keeps the trust aligned with its core purpose.

1️⃣ Maintain Legal Standing & Avoid Penalties

• Required filings: Audited financial statements, ITR-7, FCRA forms (if applicable)

• Consequences of non-compliance:

  • Monetary fines & penalties

  • Loss of tax exemptions

  • Ineligibility for government grants

  • Cancellation of trust registration

2️⃣ Boost Transparency & Accountability

• Filing annual reports and holding meetings improves operational transparency.

• Builds confidence among donors, beneficiaries, and regulators, increasing potential funding.

3️⃣ Retain Tax Exemptions (Sections 12A & 80G)

• Timely and accurate filing of:

  • ITR-7

  • Form 10B (Audit Report)

  • Form 10BD (Donations Statement)

  • Form 10BE (Donation Certificates)

• Non-compliance risks loss of valuable tax benefits.

4️⃣ Protect Trust Assets & Mission

• Ensures responsible asset management per the trust deed.

• Prevents misuse of funds and legal disputes.

5️⃣ Enhance Credibility & Public Trust

• Transparent and accountable governance fosters long-term support, donations, and partnerships.

Documents Required for Annual Trust Compliance

1. Core Trust Documents

• Trust Deed (original + amendments)

• PAN & TAN of the trust

• Registration Certificate

• 12A & 80G Certificates (if applicable)

2. Financial Records

• Bank statements (including FCRA account, if applicable)

• Bills, vouchers, and books of accounts

• Investment proofs

• Loan & advance records

3. Donation Records

• Donor register (with PAN, address, and donation amount)

• Donation receipts

• Grant agreements

• Corpus donation details

4. FCRA Records (if applicable)

• FCRA certificate

• FCRA bank statements

• Donor details for foreign funds

• Utilization reports

• Last filed Form FC-4

5. Past Compliance Reports

• Previous ITRs & audit reports

• Past FCRA returns

• Trustee meeting minutes

Key Annual Compliances for Trusts in India

Every trust in India—whether private, public, or religious—must follow certain annual compliance requirements to remain legally valid, financially secure, and operationally smooth.

1. Filing the Trust’s Income Tax Return (ITR)

• Applicability: All trusts must file an ITR if their total income (before exemptions under Sections 11 & 12) exceeds ₹2.5 lakhs.

• Common Forms:

  • Public/charitable trusts (registered under 12A/12AB & 80G) → ITR-7

  • Due date: October 31 of the assessment year (if audited)

• Non-Compliance Risks: Revocation of tax exemptions under 12A/12AB & 80G, penalties, and loss of credibility.

2. Audit of Accounts

• Mandatory if: Income before exemptions > ₹2.5 lakhs.

• Forms:

  • Form 10B – for 12AB-registered trusts

  • Form 10BB – for other exemption claims

• Must be filed along with ITR to validate exemption claims.

3. Filing TDS Returns

• If the trust deducts TDS (on salaries, professional fees, rent, etc.), it must:

  • Deduct at prescribed rates

  • File quarterly returns (Form 24Q for salaries, Form 26Q for other payments)

• Failure results in penalties and interest.

4. GST Compliance

• Exempt: Charitable activities (like free education or medical relief) by 12AB-registered trusts.

• Taxable: Commercial activities or paid services.

• GST registration required if turnover exceeds:

  • ₹40 lakhs (goods)

  • ₹20 lakhs (services)

• State-specific rules apply (e.g., Maharashtra – registration under Bombay Public Trusts Act, 1950).

5. FCRA Compliance (for Foreign Donations)

• Maintain dedicated FCRA bank account.

• File Form FC-4 by December 31 each year, even for NIL receipts.

• Submit audited statements along with the return.

• Failure to comply may lead to cancellation of FCRA registration.

6. Maintenance of Books & Records

• Must maintain: Cash book, ledger, vouchers, receipts, donation registers, and asset registers.

• Records must be preserved for at least 10 years.

Special Compliance for Private Trusts

Special Compliance for Public Charitable Trusts

📅 Important Due Dates for Trust Annual Filing (India)

Staying on top of deadlines keeps your trust compliant and penalty-free.
Here’s a quick snapshot of the major statutory deadlines for tax returns, audit reports, and filings.

Note: Dates apply for the Assessment Year following the Financial Year. Always verify with latest CBDT & MCA notifications.

🛠 Step-by-Step Annual Compliance Process

1. Collect All Documents

   • Trust Deed, PAN, TAN, registration certificates (12A, 80G, FCRA)

   • Bank statements, vouchers, donor details, foreign contribution records

   • Previous year’s filings

2. Prepare Financial Statements

   • Bookkeeping, trial balance, income & expenditure account

   • Balance sheet, notes to accounts

   • Application of income (85% rule under Sec 11)

3. Conduct Audit (if applicable)

   • Appoint a CA

   • Submit records for verification

   • Get Form 10B / 10BB before ITR filing

4. File Returns & Forms

   • ITR-7 / ITR-5

   • TDS returns & certificates

   • FCRA returns

   • GST filings

   • Form 10BD / 10BE

5. Maintain Filing Records

   • Keep acknowledgements, filed forms, audit reports

   • Store both physical & digital copies for at least 10 years

Cost of Annual Compliance for a Trust

The cost is not fixed—it depends on multiple factors such as trust type, income level, transactions, and regulatory scope. Here’s what influences your annual compliance expenses:

1. Type of Trust

• Public Charitable Trusts – Higher costs due to additional filings like Form 10B/10BB, Form 10BD, and stricter income application rules.

• Private Trusts – Usually lower costs, with fewer specialized compliance burdens.

2. Annual Income & Turnover

• Audit Threshold – If total income before exemptions exceeds ₹2.5 lakh, statutory audit by a CA is mandatory.

• GST Impact – GST registration triggers monthly/quarterly filings and annual reconciliation.

3. Nature & Complexity of Transactions

• Foreign Contributions – FCRA compliance adds extra filings and bank account requirements.

• Business Income & Investments – More complex tax rules, higher CA fees.

4. Record-Keeping Quality

• Organized Records = Lower costs

• Disorganized Records = Higher professional charges

5. Professional Fees

• Vary by CA experience, service scope, and location.

6. Multiple Registrations & Filings

• More registrations (80G, FCRA, GST) = More compliance work.

Risks of Ignoring Annual Compliance

Ignoring compliance can lead to:

• Penalties and fines (₹1,000/day for Form 10B delays, ₹200/day for Form 10BD delays)

• Loss of 12AB or 80G status (making donations ineligible for tax benefits)

• Legal action against trustees for breach of trust

• Taxation at Maximum Marginal Rate (MMR)

• Reputation damage and loss of donor trust

Penalties for Delay in Filing