ITR Filing Guidance for Trusts: Know Applicable Forms & Compliance Requirements [AY 2026-27]

Trusts must choose the correct income tax return form for Assessment Year 2026-27 based on their legal status, registration, income and exemption claim.

Which ITR Form Applies To Trusts?

The correct ITR form depends on the nature of the trust.

ITR-7 For Charitable And Religious Trusts

ITR-7 is the main return form for charitable and religious trusts.

A trust must file ITR-7 if it is required to file return under:

• Section 139(4A)
• Section 139(4C)
• Section 139(4D)
• Section 139(4E)

A public charitable trust registered under Section 12AB and claiming exemption under Sections 11 and 12 must file ITR-7.

For example, a trust running a school, hospital, gaushala, temple, scholarship fund or welfare programme and claiming exemption under Section 11 must file ITR-7.

ITR-7 requires details of registration, audit report, income, donations, corpus funds, application of income, accumulation, investments and transactions with specified persons.

ITR-5 For Private Trusts And Artificial Juridical Persons

ITR-5 applies to firms, LLPs, AOPs, BOIs, artificial juridical persons and other specified taxpayers.

A private trust that does not claim exemption under Sections 11, 12 or 10(23C) must examine whether ITR-5 applies.

For example, a private family trust earning rental income and interest income will not file ITR-7 unless it claims a specific charitable or institutional exemption. Its tax treatment depends on the trust deed, beneficiary rights and assessment status under Sections 160 to 164.

Key Compliance Requirements For Trusts

1. Audit Report

A charitable or religious trust claiming exemption under Sections 11 and 12 requires audit if its total income before exemption exceeds the basic exemption limit.

The audit report must be filed in the prescribed form before the due date. Delay in filing the audit report creates exemption risk.

2. Application Of Income

A trust claiming exemption under Section 11 must apply at least 85% of its income for charitable or religious purposes in India.

For example, if a trust receives ₹1 crore during the year, it must apply ₹85 lakh for its objects, unless valid accumulation is made.

3. Accumulation Of Income

If the trust does not spend 85% of income during the year, it must comply with accumulation rules.

Specific accumulation under Section 11(2) requires filing the prescribed form and investing funds in modes allowed under Section 11(5).

4. Corpus Donations

Corpus donations must have a specific written direction from the donor.

A general donation cannot be treated as corpus merely through an accounting entry. The trust must maintain donor letters, receipts and bank records.

5. Investments Under Section 11(5)

Trust funds must be invested in permitted modes under Section 11(5).

Bank fixed deposits, government securities and other approved investments qualify. Investment in non-permitted modes creates risk of denial of exemption.

6. Benefit To Specified Persons

Section 13 restricts benefit to specified persons such as founder, trustee, substantial contributor and their relatives.

If trust property or income is used for their benefit, exemption can be denied to the extent applicable.

Examples

School Trust

A trust registered under Section 12AB runs a school and claims exemption under Section 11. It receives fees, donations and interest income.

It must file ITR-7, submit audit report, disclose application of income and maintain records of donations and expenses.

Temple Trust

A religious trust receives offerings and spends money on religious activities and public welfare.

If it claims exemption under Sections 11 and 12, it must file ITR-7 and maintain books, donation records and expenditure details.

Private Family Trust

A private family trust holds a property and earns rent.

If it is not claiming exemption under Sections 11, 12 or 10(23C), it must examine filing under ITR-5. Tax treatment depends on the trust deed and beneficiary structure.

Common Mistakes By Trusts

Trusts must avoid these mistakes:

• Filing the wrong ITR form
• Missing audit report filing
• Treating general donations as corpus
• Not applying 85% of income
• Missing accumulation compliance
• Investing funds in non-permitted modes
• Giving benefit to trustees or related persons
• Not renewing or maintaining registration
• Poor donation and expense records

Takeaway

For AY 2026-27, trusts should first identify their legal status and exemption claim.

A charitable or religious trust claiming exemption under Sections 11 and 12 should file ITR-7.

A private trust or artificial juridical person not claiming such exemption should examine ITR-5.

Trustees must ensure audit report filing, correct disclosure of donations, proper application of income, valid investments and timely return filing.

Conclusion

ITR filing for trusts for AY 2026-27 requires correct form selection and proper compliance.

For charitable and religious trusts, ITR-7 is the main form. For private trusts, AOPs, BOIs and artificial juridical persons, ITR-5 applies based on facts.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates