Private or public charitable trust

This query is : Resolved 

Querist : Anonymous (Querist)
27 November 2011

If we plan to start an Educational Institute and plan to invest our personal funds in it, should
we make the entity a Private Charitable Trust or a Public Charitable Trust? What are the fundamental differences and tax implications? Can you change a Public Charitable Trust to a Private Charitable trust in the future after a resolution is passed by the trustees and approved by the Registrar?
Really appreciate your reply
Thanks in advance.

DEFENSE ADVOCATE.-firmaction@g (Expert)
27 November 2011

Private trusts will not be given any tax benefit and you will also not get any legal permission for regular courses.

raj kumar makkad (Expert)
27 November 2011

I agree with JSDN.

prabhakar singh (Expert)
27 November 2011

The income derived from a property held under public charitable or religious trusts is exempt from tax u/s 11 subject to the fulfilment of certain conditions. However, any profit or gain of a business carried on by such trust shall not be exempt unless the business is incidental to the attainment of the objectives of the trust/institution and separate books of account are maintained by such trust/institutions in respect of such business.

Rajeev Kumar (Expert)
27 November 2011

Agree with ld. Prabhakar sir

A V Vishal (Expert)
27 November 2011

Under common law, a trust is an arrangement under which the settlor entrusts his property to certain persons or trustees, who become the legal owners of the trust property but hold it for the benefit of third parties, i.e. the beneficiaries. The basic constituents of a trust are transmutation of trust property, declaration of the purpose and the beneficiary.

The sole purpose of this Act was to introduce the English concept of legal and equitable ownership in estates in order to recognise the vested interests of the large body of domiciled Europeans and Eurasians. The existence and rules of “native property holders” such as Islamic waqfs and Hindu debuttar properties were preserved.

The Act extends to private trusts only, and not to public trusts. Nonetheless, Indian courts have held certain provisions applicable to public trusts as well, as principles of equity and good conscience, which includes Section 20.

The difference between a public and private trust is essentially in its beneficiaries: - A private trust’s beneficiaries are a closed group, while a public trust is for the benefit of a larger cross-section having a public purpose.

Trusts are not legal entities, and are governed by the trust deed and applicable local laws. Depending on the corpus, a trust may be formed as a company or society. In case of companies, Section 25 of the Companies Act applies to non-profit making companies while institutions established for promoting religion, science etc. may also be registered as limited companies.

Under the Income Tax Act, wholly charitable and religious trusts are exempt from tax. A notified approval from the DG Income Tax Exemptions may be obtained under Section 10 (23C), subject to the fulfilment of certain specified conditions.

raj kumar makkad (Expert)
27 November 2011

A V Vishal has mastry over such subjects and I fully endorse his views as and when expressed.

M/s. Y-not legal services (Expert)
27 November 2011

i hope you got enough answer.

i hope the trust will be in the interest of education only.. if its mean just welcome..

or we dont want one more owner who going to earn in the name of education institution.

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