ITR for Charitable Organisations

(ITR for Charitable Organisations - Section 8 Companies/ Societies / NGO / Trust)

All the organisations working for charitable purpose includes relief of poor people like education, medical relief, and the advancement of any object of general public utility. There are different forms of organisations that can be formed for rising out a hand for charitable activities such as Section 8 Companies, Societies, and Trusts. Charitable Trusts / Societies are covered under NGO.

Advantages Of ITR FIling For Society/Trust

  1. To receive government grant

The main advantage of income tax return filing of charitable is to easily receive the government grants in their field. If your trust is eligible as per the guidelines of ministry/ organization / department then only you can apply for the government grants. The funding issued by the concerned ministry or department is based on the income tax return, profile of NGO and Annual Reports, Audit Reports. So ITR filing is the key factor to receive the government grant.

  1. Easy loan processing

Income Tax return filling helps charitable trusts in taking loan from various Financial Institutions. Most of the banks and NBFCs ask for ITR receipts from business for latest three year when a business applies for a high-value loan like long term loan or working capital loan. Lenders consider ITR as the most authentic document supporting business turnover and income. Hence, you should regularly file income tax return if you want to take loan in the future.

  1. Exemption from Income tax

Income derived from property held under trust or of an institution wholly for charitable/religious purpose is exempt, if 85% of the income is spent on the objects of the trust, during the year. If the amount spent is less than 85% of the income, the shortfall is taxable. The Income Tax Act exempts the income of a charitable trust from the scope of Income Tax. If the charitable or religious trust spends more than or equal to 85% of its total receipts towards its object in India, then there is no tax on balance 15%.

  1. Define net worth

The ITR filed with the Government defines the financial worth of a company. Return filling help in tracking the net worth of an entity it shows companies turnover, its assets and income, the track of ITR shows the financial capacity and also increases the capital base of a person.

ITR Form

ITR-7: ITR-7 is for persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) or section 139(4E) or section 139(4F).
Return by charitable trust section 139(4A)Return under section 139(4A) is required to be filed by every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes.

Return by agency section 139(4C): Return under section 139(4C) is required to be filed by every

  1. Scientific research association;
  2. News agency
  3. Association or institution referred to in section 10(23A)
  4. Institution referred to in section 10(23B)
  5. Fund or institution or university or other educational institution or any hospital or other medical institution.

Return by business trust section 139(4E): Return under section 139(4E) must be filed by every business trust which is not required to furnish return of income or loss under any other provisions under this section.

Return by political party (section 139(4B): Return under section 139(4B) is required to be filed by a political party if the total income without giving effect to the provisions of section 139A exceeds the maximum amount, not chargeable to income-tax.

Return by university, colleges (section 139(4D): Return under section 139(4D) is required to be filed by every university, college or other institution, which is not required to furnish return of income or loss under any other provision under this section.

Return by investment fund (section 139(4F): Return under section 139(4F) must be filed by any investment fund referred to in section 115UB. It is not required to furnish return of income or loss under any other provisions of this section.

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