Union Budget 2025: A New Dawn for Charitable Trusts

In a groundbreaking move, the Union Budget 2025 has introduced significant reforms aimed at easing the regulatory burden on charitable trusts and institutions. For the first time in years, these entities can breathe a sigh of relief, thanks to the extended validity of registration from five to ten years. However, this benefit is exclusively available to smaller trusts with an annual income below Rs 5 crore.

Key Highlights of Budget 2025

The budget also introduces a more lenient approach towards minor errors in registration applications, ensuring that such oversights do not lead to the deregistration of trusts. This is particularly crucial for trusts in metro cities, where assets like land and buildings are significant. The fear of an 'exit tax' on deregistration, which was akin to a death knell for many, has been alleviated.

Gautam Nayak, a tax partner at CNK & Associates, emphasizes the importance of understanding the fine print. He points out that the extended registration period applies to trusts with an income of less than Rs 5 crore in the two years preceding the application for renewal. This change, effective from March 31, 2025, marks a significant shift in the regulatory landscape for charitable trusts.

What This Means for Donors and Trusts

Donors to these trusts can also benefit, provided the trust is approved under section 80G. This approval allows donors to claim tax benefits under the old regime. Moreover, the budget has revised the criteria for 'specified persons', increasing the donation limit from Rs 50,000 to Rs 1 lakh for the year, or an aggregate of Rs 10 lakh since inception. This change is expected to simplify record-keeping for trusts, especially those with a long history.

In conclusion, the Union Budget 2025 has ushered in a new era for charitable trusts, offering them greater flexibility and easing the compliance burden. These changes are a testament to the government's commitment to supporting the philanthropic sector and encouraging charitable activities across the nation.