Gift of immovable property to a trust
This query is : Resolved
10 March 2016
Sir,
If the bye-laws of a trust permits that the trust can receive an immovable property from anyone without any consideration for the welfare of the society then what would be the legal compliance under income tax law for the trust point of view for the execution of such transaction?
11 March 2016
Gift of immovable property by a donor to a trust is not treated as a transfer u/s 47. Hence, there is no tax liability in the hands of donor. As per section 2(iia) voluntary contributions received by a trust is treated as income. Chargeability or non-chargeability of such income to tax may be checked with your tax consultant as it depends on nature of the trust and its registrations with IT Authorities etc.
11 March 2016
What are the tax treatments if the trust is registered u/s 12AA ? Kindly quote the relevent section in this regard. Thanking you.
11 March 2016
What are the tax treatment, if the trust is registered u/s 12AA. Kindly quote the relevant section in this regard. Thanking you.
11 March 2016
What are the tax treatment, if the trust is registered u/s 12AA? Kindly quote the relevant section in this regard. Thanking you.
25 July 2024
If a trust is registered under section 12AA of the Income Tax Act, 1961, it means that the trust qualifies for tax exemption on its income, provided it complies with certain conditions. Here's how the tax treatment would generally apply if the trust receives an immovable property as a gift:
1. **Receipt of Immovable Property**:
- When the trust receives an immovable property as a gift, it needs to ensure compliance with legal and procedural requirements for the transfer of property. This typically involves executing a gift deed in favor of the trust.
2. **Tax Treatment for the Trust**:
- **Exemption under Section 11**: Section 11 of the Income Tax Act provides exemptions to income derived from property held for charitable or religious purposes to the extent that such income is applied for charitable or religious purposes in India. This includes income from property received as a gift.
- **Section 12AA Registration**: Since the trust is registered under section 12AA, it enjoys tax exemption under sections 11 and 12. Therefore, any income derived from the gifted immovable property, such as rental income or capital gains upon its sale, would generally be exempt from tax, provided it is applied for charitable purposes as per the trust's objectives.
3. **Conditions to be Met**:
- The trust must adhere to the conditions laid down in sections 11 and 12 of the Income Tax Act, which include:
- The income must be applied for charitable or religious purposes within India.
- The income should not be applied or accumulated for the benefit of any particular person or entity except for the charitable purposes of the trust.
- The trust should maintain proper books of accounts and get them audited annually.
4. **Registration and Reporting Requirements**:
- The trust needs to maintain its registration under section 12AA by filing annual returns and complying with other procedural requirements as specified by the Income Tax Department.
- It must also disclose the receipt of the immovable property in its annual income tax return, detailing the nature and value of the gift received.
5. **Legal Compliance**:
- Apart from income tax considerations, the trust should also ensure compliance with any other applicable laws related to the receipt, ownership, and management of immovable property, such as local property laws, registration requirements, and stamp duty obligations.
In conclusion, if the trust is registered under section 12AA and receives an immovable property as a gift in accordance with its bye-laws, the transaction would generally be tax-exempt under sections 11 and 12 of the Income Tax Act, provided the income derived from the property is used for charitable purposes as mandated by the Act. It's advisable to consult with a qualified tax advisor or chartered accountant to ensure proper compliance and documentation for such transactions.
1. **Receipt of Immovable Property**:
- When the trust receives an immovable property as a gift, it needs to ensure compliance with legal and procedural requirements for the transfer of property. This typically involves executing a gift deed in favor of the trust.
2. **Tax Treatment for the Trust**:
- **Exemption under Section 11**: Section 11 of the Income Tax Act provides exemptions to income derived from property held for charitable or religious purposes to the extent that such income is applied for charitable or religious purposes in India. This includes income from property received as a gift.
- **Section 12AA Registration**: Since the trust is registered under section 12AA, it enjoys tax exemption under sections 11 and 12. Therefore, any income derived from the gifted immovable property, such as rental income or capital gains upon its sale, would generally be exempt from tax, provided it is applied for charitable purposes as per the trust's objectives.
3. **Conditions to be Met**:
- The trust must adhere to the conditions laid down in sections 11 and 12 of the Income Tax Act, which include:
- The income must be applied for charitable or religious purposes within India.
- The income should not be applied or accumulated for the benefit of any particular person or entity except for the charitable purposes of the trust.
- The trust should maintain proper books of accounts and get them audited annually.
4. **Registration and Reporting Requirements**:
- The trust needs to maintain its registration under section 12AA by filing annual returns and complying with other procedural requirements as specified by the Income Tax Department.
- It must also disclose the receipt of the immovable property in its annual income tax return, detailing the nature and value of the gift received.
5. **Legal Compliance**:
- Apart from income tax considerations, the trust should also ensure compliance with any other applicable laws related to the receipt, ownership, and management of immovable property, such as local property laws, registration requirements, and stamp duty obligations.
In conclusion, if the trust is registered under section 12AA and receives an immovable property as a gift in accordance with its bye-laws, the transaction would generally be tax-exempt under sections 11 and 12 of the Income Tax Act, provided the income derived from the property is used for charitable purposes as mandated by the Act. It's advisable to consult with a qualified tax advisor or chartered accountant to ensure proper compliance and documentation for such transactions.
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