Taxman Tightens Grip on Charitable Trusts

The Income Tax department is implementing stricter guidelines for public charitable trusts, requiring trust deeds to explicitly state their 'irrevocable' nature and disallow any expenses to foreign entities. Failure to comply with these conditions will result in the denial of tax benefits crucial for the survival of these organizations. The tax office has reportedly rejected several applications for the renewal of these benefits, which are essential for continued operation.

This heightened scrutiny is believed to stem from concerns about potential misuse of trust assets, such as dismantling organizations or funneling money abroad through bogus expenses. However, legal experts suggest that existing laws already prevent such actions unless explicitly stated otherwise in the trust deed. The explicit requirement for an 'irrevocability' clause is being questioned, as trusts are generally considered irrevocable by default unless a right of revocation is reserved by the settlor.