IT DEPARTMENT TELLS CHARITABLE TRUSTS TO ADD IRREVOCABLE CLAUSE IN THEIR TRUST DEEDS- WHAT IT MEANS?

 IT DEPARTMENT TELLS CHARITABLE TRUSTS TO ADD IRREVOCABLE CLAUSE IN THEIR TRUST DEEDS- 

                    WHAT IT MEANS?

 “IRREVOCABLE CLAUSE” IN THEIR TRUST DEEDS

The Income Tax Department has recently been insisting that charitable and religious trusts include a clear “irrevocable clause” in their Trust Deeds—especially at the time of 12AB registration / renewal, and in 80G approval cases.

WHY THIS CLAUSE MATTERS?

The department wants explicit assurance that:

• The trust cannot be revoked by the settlor/ trustees at will.
• The assets of the trust will continue to be used only for charitable purposes.
• On dissolution, the assets will be transferred to another registered charitable organisation, not distributed among trustees or members.

This ensures long-term protection of public charitable assets and prevents misuse.

WHAT THE IT DEPARTMENT IS CHECKING?

Trust deeds must clearly state that:

1.The trust is irrevocable.

2.No part of income or assets will benefit any trustee, settlor, or specified persons.

3.Upon winding up, assets will transfer to another 12AB-registered trust with similar objectives.

4.Activities will always remain charitable as defined under Sec. 2(15).

WHAT CHARITABLE TRUSTS SHOULD DO?

·      Review the Trust Deed.

·      If the irrevocability or dissolution clauses are missing or vague, amend the deed through the appropriate authority (Sub-Registrar/ Charity Commissioner).

·      Submit the amended deed during 12AB/80G application or when queried by the department.

WHY THE  IT DEPARTMENT IS PUSHING IT NOW?

With the stricter 12AB regime, the IT Department wants to ensure that trusts cannot dissolve themselves and divert assets—closing loopholes used for tax avoidance and private benefit.

R V SECKAR FCS,LLB 79047 19295