Charitable Trusts

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CA. Rishabh Mittal (Querist)
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11 May 2009 Hi All,

Can anyone provide me the details regarding formation of a charitable trust, registration for Income tax purposes, other formalities to be undertaken, etc. Also, the specific requirements for the audit of a charitable trust ... You can mail me any relevant stuff at rishabh.mittal@icai.org

Thanks in advance,

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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11 May 2009 Step 1 : Prepare a Trust deed with a corpus of 1000. The author of trust can himself be a trustee.

Step 2 : Once the trust is registered under the society act you will get a certificate from the registrar of societies.

Step 3 : Receive the other funds for the trust and appoint more number of trustees as per trust deed.

Step 4 : Apply for income tax pan.

Step 5 : Apply for registration under chartiable trust category of incometax under section 11 with the regional commissioner of income tax for chartiable institutions.

Step 6: The commissioner will call for details and personal interview of trustees.

Step 7 : Based on the details and records produced by the trustees the commissioner may reject or accpet the appliacation.

Step 8 : If registration is granted then you are eligible for exemption otherwise it will be treated as aop and taxed accordingly.

CA. Rishabh Mittal

CA. Rishabh Mittal (Querist)
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11 May 2009 Thanks for the reply. Also, please guide me regarding the financial details such as registration charges, What if I want the trust to be registered u/s 25 of The Companies Act, 1956, Can I get the website created for the trust, etc..

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CA. Rishabh Mittal

CA. Rishabh Mittal (Querist)
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11 May 2009 Also, What are the conditions to be fulfilled in case the trust is going to get the funds from outside India...

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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19 July 2024 When a charitable trust in India intends to receive funds from outside India, especially from foreign donors or foreign sources, there are several conditions and regulations to be fulfilled. Here are the key considerations:

### 1. FCRA Registration

- **FCRA Registration:** The Foreign Contribution (Regulation) Act, 2010 (FCRA) regulates the acceptance and utilization of foreign contributions and donations by charitable organizations in India. It is mandatory for charitable trusts to obtain FCRA registration if they intend to receive foreign contributions.
- **Eligibility:** Trusts must meet certain eligibility criteria and operational norms prescribed under the FCRA for registration.

### 2. Conditions and Compliance

- **Purpose:** Foreign contributions can only be accepted for specific purposes as defined under the FCRA, which include social, educational, religious, economic, and cultural activities.
- **Prohibited Activities:** Funds received cannot be used for activities that are detrimental to national interest, public interest, or for speculative purposes.
- **Designated Bank Account:** Contributions must be received in a designated bank account specifically opened for this purpose and maintained in a designated bank.
- **Prior Approval:** In certain cases, prior approval from the Ministry of Home Affairs may be required before accepting foreign contributions.

### 3. Reporting and Compliance

- **Annual Return:** Charitable trusts registered under FCRA are required to submit annual returns detailing the receipt and utilization of foreign contributions.
- **Utilization:** Foreign contributions must be utilized only for the specific purposes for which they were received and in accordance with the provisions of the FCRA.
- **Audit:** The accounts of the trust receiving foreign contributions must be audited annually by a chartered accountant.

### 4. Legal and Regulatory Framework

- **Compliance:** Ensure compliance with all provisions of the FCRA and other applicable laws and regulations related to foreign contributions.
- **Legal Advice:** Seek legal advice to understand the specific requirements, procedures, and documentation necessary for receiving foreign funds.

### 5. Other Considerations

- **Tax Implications:** Understand the tax implications of receiving foreign contributions and comply with applicable tax laws.
- **Donor Due Diligence:** Conduct due diligence on foreign donors to ensure they are reputable and the contributions are legitimate.

### Conclusion

Receiving funds from outside India involves adherence to stringent regulatory requirements under the FCRA to ensure transparency, accountability, and compliance with Indian laws. Charitable trusts should carefully assess their eligibility, obligations, and the legal framework before seeking or accepting foreign contributions to avoid legal repercussions and ensure effective utilization of funds for charitable purposes.