UNDER WHICH PROVISION DOCTOR REGISTERED AS TRUST

Hi Vaibhav,

If your client is a doctor wanting to register a trust for providing medical services (at cost plus profit) and wants to claim benefits under the Income Tax Act, here’s what you should know:

1. Type of Trust to Register:

• Public Charitable Trust:
  Generally, medical services trusts are registered as charitable trusts under the Indian Trusts Act, 1882 (in states where that act applies) or under relevant state laws.
  The trust deed should clearly state the objectives as charitable, such as promoting healthcare, medical relief, and general welfare.

• Section 12AA / 12AB Registration:
  To claim income tax exemption benefits under the Income Tax Act, the trust must get registration under Section 12AA (now 12AB) of the Income Tax Act, 1961.

2. Which provisions for exemption?

• Under Section 11 of the Income Tax Act, trusts carrying out charitable activities like providing medical services can claim exemption on their income, subject to compliance with conditions.

• Section 2(15) defines charitable purpose, including relief of the poor, medical relief, and advancement of any other object of general public utility (with certain conditions).

3. Key Points for Medical Trusts:

• The trust should be non-profit in nature; profits should be ploughed back into the trust's activities.

• Providing medical services at cost or cost plus reasonable profit is allowed, but the overall intent should be charitable.

• Maintain proper books, accounts, and adhere to audit and filing requirements.

4. Steps to Register the Trust:

• Draft a trust deed specifying charitable objectives.

• Register under the applicable Trust Act or Societies Act or Companies Act (if choosing Section 8 Company).

• Apply for 12AA/12AB registration from the Income Tax Department to claim tax benefits.

Summary:

If your client intends to provide services with profit motive, the trust may not qualify for exemption. You can advise on keeping the profit minimal or reinvested into charitable activities.