Default in filling it return by education trust

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 October 2012 helo i want to the consequences of non filling of income tax return by the educational trust whose income is not exceeding the chargeable total income.In this circumstances what are the consequences will met by the educational trust.

Taxguy

Taxguy (Expert)
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28 October 2012 It may loose on its recognition if any under 80G or 12AA, as these recognition need you to compile with IT Act.

Querist : Anonymous

Querist : Anonymous (Querist)

28 October 2012 if it looses its recognition?under what head the income will be shown?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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20 July 2024 If an educational trust fails to file its income tax return, even if its income is not exceeding the chargeable total income, it can face several consequences:

1. **Penalty for Non-filing**: The Income Tax Act mandates that every person, including trusts, should file an income tax return if their income exceeds the basic exemption limit or if they have incurred losses which they want to carry forward. Failure to file the return within the due date may attract a penalty under Section 234F of the Income Tax Act. The penalty can range from Rs. 1,000 to Rs. 10,000, depending on the delay in filing the return.

2. **Interest on Tax Liability**: If the trust has any tax liability due to its income but fails to file the return, it may be liable to pay interest under Section 234A, 234B, and 234C of the Income Tax Act. Interest is levied on the amount of tax payable, and the rate of interest varies depending on the specific circumstances of non-payment.

3. **Loss of Exemption**: Educational trusts typically enjoy tax exemption under Section 10(23C) or Section 11 of the Income Tax Act, provided they comply with various conditions, including filing of their income tax returns. Non-compliance, such as failure to file returns, could lead to a loss of exemption status, thereby making the income of the trust taxable.

4. **Other Consequences**: Besides penalties and interest, non-filing of income tax returns can lead to legal notices and demands from the Income Tax Department. It may also affect the trust's reputation and standing with regulatory authorities.

**Loss of Recognition**: If the trust consistently fails to comply with income tax filing requirements and other statutory obligations, there could be a risk of losing its recognition under various provisions of the Income Tax Act. For example, under Section 10(23C), trusts are required to maintain their charitable or educational objectives and comply with statutory requirements to continue enjoying tax exemption. If the Income Tax Department finds persistent non-compliance, it could withdraw the trust's recognition, making its income taxable.

**Income Tax Treatment**: If the trust's income becomes taxable due to loss of exemption or other reasons, it will be assessed under the applicable provisions of the Income Tax Act. The income would then be computed as per the provisions of the Act, and tax would be levied accordingly.

In summary, educational trusts must ensure timely compliance with income tax filing obligations to avoid penalties, interest, and potential loss of tax-exempt status. Proper adherence to statutory requirements not only ensures compliance but also preserves the trust's credibility and benefits as a recognized entity under the Income Tax Act.