SLAB FOR UNREGISTERED TRUST

[BHARAT COKING COAL LIMITED]

A public trust namely Gurudwara Shri Guru Singh Sabha Trust, (no defined share of trustees) has been registered at the registry office of the state government in Nov'14. However registration u/s 12A of Income Tax Act has not been applied for i.e. not recognised as per Income Tax Act for want of audited accounts for three years.

Trust earns some House Property Income for FY 2014-15 on which TDS has been made. A return in ITR 7 has been filed wherein no expenses have been claimed on the opinion received that expenses can only be claimed by registered trust. The return was declared defective for non furnishing of audit details which was later furnished. In the ITR 7 tax was auto-computed giving basic exemption of ₹ 2.5 lakh (treating it as AOP). However the return processed at CPC has computed tax at Maximum Marginal Rate(MMR). Is the action by CPC correct? Whether unregistered trust,(as per Income Tax) will be charged MMR or will be treated as AOP and slab benefit will be given? Whether unregistered trust can claim expenditure of charitable nature? Original return being belated, can 154 application be filed for claim of expenditure?

Thanks in advance. Anxiously waiting for reply and guidance on the aforesaid issue.

[Ravi Kumar]

your way of documentation keeping if going wrong,

you must have to keep all records and expenses and on the way under proper system.

please make a list of dates for filling and documentations.

the limit of 2.5 lakh will apply only in case of individual & business started with individual PAN card. unreg business also included ,

you are reg under a trust but at the timing of filling it will show a AOP if your business have no pan of reg with your pan no of individual.

thus pay tax above the income of 2.5 lakh at slab rates..

[Siva Rama]

1. You are an AOP. AOP taxation is as follows

In case the shares of members are determinate or known - Slab rate applies - Condition - No member's income exceeds maximum amount not chargeable to tax

In case the shares of members are non-determinate or not known - MMR

In the case of non-profit org - where there is no distribution of income to members. Here shares of members are determinate and known (being Zero for all members) . So slab rate applies. My opinion. But how is it possible to know that none of the members have income exceeding max amount not chargeable to tax. Not possible. No proof. A small trust with 2 or 3 members it is possible. But for trust with numerous members, I dont think it is easy to know. So MMR applies.

2. Why unregistered trust cannot claim expenditure of charitable nature? (Speaking generally). If trust is registered under section 12A, surplus is not taxable provided 85% expenditure condition etc satisfied. For others surplus straight away taxable.

3. New expenditure cannot be claimed in 154. 154 is only to rectify mistake apparent on record.

Regards,

Siva

AI Summary

Unregistered Trust Taxed at Maximum Marginal Rate; Clarifications on AOP Taxation and Section 154 Expense Claims A public trust, Gurudwara Shri Guru Singh Sabha Trust, registered with the state but not under section 12A of the Income Tax Act, filed an ITR 7 for FY 2014-15, claiming no expenses due to its unregistered status. The return was initially defective due to missing audit details but was later processed, with tax computed at the Maximum Marginal Rate (MMR) instead of a basic exemption, treating it as an Association of Persons (AOP). Queries arose regarding whether an unregistered trust should be taxed at MMR, if it can claim charitable expenses, and if a belated return allows for a 154 application to claim expenses. Responses clarified AOP taxation rules and limitations on claiming new expenditures under section 154.