Introduction
PAN linked trusts have seen a major rise since the Covid-19 pandemic, with over 5 lakh new entities added to the system. This sudden surge has raised compliance challenges for tax authorities and trustees alike. If you’re managing or planning to form a trust in India, here’s what you must know about PAN, tax filings, and audit obligations.
Why Trust Registrations Rose After Covid
- Many families and HNIs created private trusts for succession and asset protection.
- Covid exposed the need for structured estate planning.
- Charitable donations and CSR efforts triggered more public trust formations.
- Government tightened rules on trust transparency, mandating PAN and filings.
When is PAN Mandatory for a Trust?
As per Rule 114B of the Income-tax Rules:
| Type of Trust | PAN Requirement |
|---|---|
| Public Charitable Trust | Mandatory if claiming Section 12A/80G |
| Private Family Trust | Mandatory if income exceeds basic exemption limit |
| Any trust with financial transactions | Mandatory for opening bank account, investments, TDS |
CBDT Notification No. 19/2018 mandated that even non-profit entities must quote PAN in all financial interactions.
Income Tax Filing for Trusts (AY 2025–26 Onwards)
- Form 10B or 10BB for audit under Section 12A(1)(b)
- ITR-7 for charitable and religious trusts
- ITR-5 for private trusts not registered under Section 12A
Ensure registration under Section 12AB (post-2020 regime) to claim exemption.
What Happens If Trust Doesn’t File ITR?
Non-compliance may attract:
- Penalty under Section 234F
- Withdrawal of Section 10(23C) or 11/12 exemptions
- Loss of donor eligibility to claim 80G deduction
👉 Case law: DIT v. Bharat Diamond Bourse (2003) 259 ITR 280 (Bom) – reiterated the need for regular returns even if income is exempt.
Expert Tip:
“Trusts must file even NIL returns and audit reports online. Don’t assume exemption means no filing.”
Recent Legal and Regulatory Developments
- CBDT Circular No. 6/2023: Tightens scrutiny on misuse of charitable status.
- Form 10A/10AB compliance for renewal of exemption status.
- PAN-Aadhaar linking mandatory for all non-individual entities (including trusts).
Common Mistakes Trustees Make
- Assuming PAN is optional for old trusts
- Missing audit deadlines (esp. for trusts over ₹2.5 lakh annual receipts)
- Using the settlor’s PAN instead of trust’s PAN
- Not maintaining books as per Section 44AA read with Rule 6G
FAQs on PAN Linked Trusts
Q1. Can one PAN be used for multiple trusts?
No. Each trust needs a separate PAN under its own name.
Q2. What is the deadline to file ITR for trusts in AY 2025–26?
31st October 2025 (if audit applicable); 31st July otherwise.
Q3. Is PAN needed if the trust is dormant?
Yes, for identity purposes—even if no income is earned.
Summary
PAN linked trusts in India grew by over 5 lakh post-Covid. Private and charitable trusts must comply with ITR filings, audit rules, and PAN requirements or risk penalties.