ITR Filing for Trusts Receiving Donations: Compliance Rules
- PRITI SIRDESHMUKH
- Dec 7, 2025
- 8 min read
ITR filing for trusts receiving donations requires strict compliance with the Income Tax Act, 1961. Trusts registered under sections like 12AB, 10(23C), or 80G must file ITR-7 and report all donations in Form 10BD. The process involves maintaining accurate records, meeting audit requirements, and disclosing donor details to retain exemptions under Sections 11 and 12. Updated reporting rules, validation checks, and mandatory disclosures ensure transparency for donors and regulators. Platforms such as TaxBuddy now help trusts handle detailed compliance tasks, including donation reporting and exemption calculations, making the annual filing process more structured and error-free.
Table of Contents
Understanding ITR Filing Requirements for Trusts Receiving Donations
Trusts that receive donations—whether charitable, religious, or institutional—must comply with specific income tax reporting rules to maintain their exemption status. These rules apply to trusts registered under Section 12A/12AB or approved under Section 80G. Any voluntary contribution received, including corpus donations, must be reported accurately in the return of income. Since donations form a major component of income for not-for-profit entities, the Income Tax Department has made the disclosure requirements more stringent to improve transparency and ensure proper fund utilisation.
Applicable ITR Form for Trusts (ITR-7)
Trusts receiving donations must file their return using ITR-7, the prescribed form for entities claiming exemptions under Sections 11, 12, 13A, 13B, 10(23C), and similar provisions. ITR-7 captures detailed schedules related to income application, accumulation, movements in corpus, and compliance with filing of Form 10B/10BB. Filing ITR-7 is mandatory even if the trust’s income becomes fully exempt after application of funds. E-filing with a valid digital signature or EVC is compulsory for all registered trusts.
Key Income Tax Sections Governing Trust Donations
Donations received by charitable and religious trusts are governed primarily by Sections 11, 12, 12A/12AB, 80G, and 115TD. Section 11 provides an exemption from income applied for charitable or religious purposes. Section 12 treats voluntary contributions as income. Trusts must maintain valid registration under Section 12AB to claim these benefits. Donors claiming deductions under Section 80G can do so only when the trust is officially approved. Together, these sections ensure regulated management of charitable funds.
Donation Reporting Rules: Form 10BD and Donor Compliance
Every trust receiving donations must file Form 10BD annually, providing item-wise donor details such as PAN, Aadhaar, donation type, and mode of payment. After filing 10BD, the trust must issue donation certificates in Form 10BE to donors so they can claim 80G deductions. Non-filing or incorrect filing of Form 10BD attracts penalties and may also affect the donor’s tax benefits because donations must reflect accurately in the Income Tax portal.
How Exemptions Work for Trusts Under Sections 11 and 12
Sections 11 and 12 grant exemptions on income applied toward charitable or religious objectives, provided certain conditions are met. A minimum of 85% of income must be applied during the financial year. The remaining 15% can be accumulated without conditions. If income cannot be applied due to genuine reasons, trusts may accumulate it for up to five years by filing Form 10. Donations earmarked as “corpus” with a specific written direction are exempt from application requirements but must be invested in approved modes.
Audit Rules and Documentation Requirements for Trusts
If a trust’s income (before exemption) exceeds ₹2.5 lakh or it claims exemption under Sections 11 and 12, it must undergo a compulsory audit under Section 12A(1)(b). The audit report must be submitted electronically through Form 10B or Form 10BB, depending on the trust’s category and registration. Trusts must maintain proper books of accounts, minutes of meetings, investment registers, donation receipts, bank statements, vouchers, and utilisation proofs for expenses.
Mandatory Disclosures in ITR-7 for AY 2025–26
ITR-7 requires trusts to declare detailed information, including: • Voluntary contributions (corpus and non-corpus) • Application of income for charitable purposes • Accumulation under Section 11(2) • Schedule of assets and liabilities • Registration/approval details under Section 12AB and 80G • Audit report details • Foreign contribution receipts (if any) These disclosures ensure transparency and demonstrate adherence to the trust’s stated objectives.
Compliance Rules for Trusts Receiving Foreign Donations
Trusts receiving foreign donations must comply with FCRA (Foreign Contribution Regulation Act) provisions. Only FCRA-registered trusts can accept contributions from foreign sources, and funds must be received in the designated FCRA bank account. Annual FCRA returns (Form FC-4), donor disclosures, and utilisation reports must be filed on time. Non-compliance can lead to cancellation of FCRA registration, penalties, and suspension of foreign funding.
Penalties for Non-Compliance and Missed Deadlines
Failure to comply with audit filing, Form 10BD submission, ITR-7 filing, or utilisation conditions may attract penalties under Sections 234F, 271K, or other applicable provisions. Incorrect reporting of donations can also cause donors to lose their 80G benefit. Late filing removes the trust’s ability to accumulate income under Section 11(2) and may lead to loss of exemption for the year, making the entire income taxable at the maximum marginal rate.
How Technology Platforms Like TaxBuddy Support Trusts
Platforms like TaxBuddy simplify compliance by offering structured workflows for donation accounting, Form 10BD filing, trust audits, and ITR-7 preparation. Automated checks reduce the chances of errors, while tax experts ensure compliance with Sections 11, 12, and 80G. This allows trusts to focus on charitable activities rather than navigating complex tax rules.
Conclusion
Compliance is a critical requirement for trusts receiving donations. Accurate reporting, proper documentation, and timely filings help preserve exemption benefits and maintain donor confidence. Using digital platforms ensures both accuracy and convenience in meeting annual tax obligations.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
What is the due date for filing ITR-7 for trusts receiving donations? The standard due date for filing ITR-7 for charitable and religious trusts, including those receiving voluntary donations, is July 31 of the relevant assessment year. Trusts that are required to get their accounts audited under Section 12A(1)(b) or Section 44AB receive an extended deadline of October 31. Additionally, Form 10BD—which reports the details of donations received—must be filed by May 31 every year. This early deadline ensures that donation data is validated well before the ITR filing window and prevents delays or mismatches during scrutiny.
Do all donations need to be reported for ITR filing? Yes. Every donation received by a trust—irrespective of the amount—must be recorded in the books of accounts. Donations of ₹50,000 or more, or those eligible under Section 80G, require mandatory reporting of donor details such as name, address, and PAN or Aadhaar. These details must also be included in Form 10BD. Proper disclosure ensures transparency, supports donor tax claims, and reduces compliance risks during verification by the Income Tax Department.
Are foreign donations treated differently? Foreign contributions are governed by the Foreign Contribution (Regulation) Act (FCRA). Trusts receiving foreign donations must hold a valid FCRA registration or approval before accepting such funds. These donations must be routed through a designated FCRA bank account and reported separately in both ITR-7 and FCRA annual returns. The Income Tax Department treats foreign contributions as a distinct category, and non-compliance with FCRA norms can lead to cancellation of registration and severe penalties.
Can a trust lose its exemption status? Yes. A trust may lose its exemption status if it fails to comply with the conditions laid down under Sections 11, 12, and 80G. Common triggers include non-filing or delayed filing of ITR-7, failure to submit audit reports, non-submission of Form 10BD, or deviation from approved charitable activities. The authorities can also suspend or cancel exemption registration if the trust engages in profit-making activities without adhering to the prescribed rules. Losing exemption status increases tax liability and may impact future donations.
How does TaxBuddy help trusts with their tax filing? TaxBuddy provides a structured filing experience tailored for charitable and religious trusts. It auto-imports TDS data, donation details, and donor records, helping prevent manual errors. The platform validates compliance with Sections 12AB, 80G, and FCRA requirements and ensures that all disclosures in ITR-7 are accurate and complete. With guided prompts, expert review, and real-time error detection, TaxBuddy simplifies the process of filing Form 10BD and ITR-7, making compliance smoother and more reliable.
How is interest from recurring deposits taxed? Interest earned from recurring deposits is treated as taxable income under the head Income from Other Sources. Unlike fixed deposits, banks generally do not deduct TDS on recurring deposit interest, which means the responsibility of reporting and paying tax rests entirely on the taxpayer. The interest must be declared in the Income Tax Return for the year in which it is credited, based on the interest certificate or statement issued by the bank. The amount is then taxed as per the applicable income tax slab rates. Taxpayers should keep track of interest earned across multiple deposits and report the full amount to avoid mismatches with the Annual Information Statement (AIS).
Are gifts received from friends taxable? Gifts received from non-relatives are taxable if the total value exceeds ₹50,000 during a financial year. This threshold covers monetary gifts, immovable property, and movable assets such as jewellery or shares. Once the total value crosses ₹50,000, the entire amount becomes taxable—not only the portion exceeding the limit. The tax is levied under Section 56(2)(x) and is added to the individual’s income under Income from Other Sources. Gifts received from specified relatives, on occasions like marriage, or through inheritance are exempt from tax, but taxpayers must maintain proper documentation to prove the exemption if needed.
How are winnings from lotteries and online gaming taxed? Winnings from activities such as lotteries, online games, fantasy sports, game shows, and betting are taxed at a flat rate of 30% under Section 115BBJ. On top of this, cess and surcharge apply, making the effective rate higher. No deductions or exemptions can be claimed against such winnings, even if the taxpayer has expenses related to participation. TDS at the rate of 30% is deducted before the winnings are paid out. The taxpayer must report the gross winning amount in the return and reconcile it with Form 26AS and AIS to ensure proper credit of TDS.
Is family pension treated as salary income or other income? Family pension received by the legal heirs of a deceased employee is not considered salary income because there is no employer-employee relationship between the payer and the recipient. Instead, it is taxed under Income from Other Sources. A standard deduction is available, allowing a reduction of 33⅓% of the family pension or ₹15,000, whichever is lower. The remaining amount is fully taxable at slab rates. This treatment helps reduce the tax burden on surviving family members who depend on the pension for financial support.
How are dividends from foreign companies taxed? Dividends received from foreign companies are taxable in India at the individual’s normal slab rates under Income from Other Sources. Since foreign countries may deduct tax at the time of payment, taxpayers can claim a foreign tax credit under Rule 128, provided valid documentation such as tax deduction certificates and foreign income statements is available. These dividends must be converted into Indian rupees at the correct foreign exchange rate for tax reporting. All such income must be disclosed accurately in the ITR to avoid mismatches with the foreign remittance details captured in AIS.
Is interest earned on income tax refund taxable? Yes, interest received under Section 244A on income tax refunds is fully taxable under Income from Other Sources. The interest is paid by the Income Tax Department when excess tax is paid and later refunded. This interest must be reported in the year of receipt, not the year the refund pertains to. It appears in Form 26AS and AIS, and taxpayers must include the amount separately in their return. Since it is taxable at slab rates, individuals should ensure correct reporting to avoid discrepancies during assessment.
Can clubbing provisions apply to income from other sources? Clubbing provisions apply when income arises from assets transferred to certain relatives without adequate consideration. For example, if a person transfers money to a spouse or minor child and they invest it in a fixed deposit or recurring deposit, the interest earned from that investment must be added to the income of the person who transferred the money. This prevents taxpayers from artificially splitting income to reduce their overall tax liability. Clubbing provisions apply to spouses, minor children, and certain other relationships specified in the Income Tax Act, and taxpayers must be aware of these rules when reporting investment-related income.
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