CSR and Social Governance · Financial and Non-financial Reporting of Different Non-Corporate Entities

Legal Framework for Accounts of Trusts and Societies

Updated 11 October 2026 · Fact-checked

Trusts and societies must keep accounts under the law that governs each one. The Indian Trusts Act, 1882 requires trustees to keep clear accounts. Societies law requires an annual list of managing body members to be filed. A Section 8 company follows the Companies Act. For tax exemption, the Income-tax Act requires books, audit above a threshold, and returns.

Understand Legal Framework for Accounts of Trusts and Societies

A trust, a society and a Section 8 company all run not-for-profit work. But each is governed by a different law. So the accounting duty differs. In the exam, first identify the entity. Then apply the law that governs it.

A private or public trust is governed by the Indian Trusts Act, 1882 where it applies, and by state public trust laws for public charitable trusts. The Act makes trustees accountable. A trustee must keep clear and separate accounts of the trust property. The trustee must give the beneficiary true and full information about the trust property when asked. The beneficiary can inspect the accounts and vouchers. Many states have their own public trust Acts that add registration, audit and return rules. Check the facts for the state.

A society is registered under the Societies Registration Act, 1860 or the state version of it. The central Act requires a yearly list of the managers, directors, governing body or similar members to be filed with the Registrar. State Acts often add audited accounts and annual returns. Say 'as per the applicable state law' when the facts do not name a state.

A Section 8 company is a company, so the Companies Act, 2013 applies in full. It must maintain books of account, prepare financial statements in the prescribed form, get them audited and file annual returns with the Registrar. It must also apply its profits to its objects and cannot pay dividends to members.

Separately, any of these entities that wants tax exemption must follow the Income-tax Act. Earlier law used Sections 11 and 12 for this. From the June 2027 session the Income-tax Act, 2025 applies, so quote the section numbers from the Act supplied in your study material. Do not mix the two Acts. The ideas stay the same. Income from property held for charitable purposes is exempt if it is applied to those purposes. The entity must be registered, keep books, get its accounts audited when income crosses the limit, and file a return.

Key rules to remember

Trustee's duty on accounts (Indian Trusts Act, 1882): Trustee must keep clear and accurate accounts of trust property and give the beneficiary full information on request; This is a duty of the trustee. The beneficiary has a matching right to inspect accounts and vouchers.
Society's filing duty (Societies Registration Act, 1860): Annual list of governing body members to be filed with the Registrar; State Acts may add audited accounts and annual returns. Name the state law if the facts give it.
Section 8 company: Companies Act, 2013 applies: books of account, financial statements, audit, annual return; Profits must go to the objects. No dividend to members.
Tax exemption conditions for charitable entities: Registration + income applied to charitable purposes + books of account + audit above the limit + return filed; Quote the section numbers from the Income-tax Act, 2025 for June 2027. Do not use old section numbers unless contrasting.
Application of income: Income applied to charitable purposes in the year; shortfall may be accumulated under the prescribed conditions; Check the exact percentage and conditions in the Act text supplied before stating a figure.

How to solve Legal Framework for Accounts of Trusts and Societies questions

Use this method for any question on accounts and filings of a trust, society or Section 8 company.

1Identify the entity: private trust, public charitable trust, society or Section 8 company.
2Name the governing law for each: Trusts Act or state trust law, Societies Registration Act or state law, or Companies Act, 2013.
3State the accounting duty under that law: books, financial statements, who can inspect.
4State the audit and filing duty: audit, annual list or return, and with whom to file.
5Add the Income-tax Act layer if the entity claims exemption: registration, application of income, audit, return.
6Apply the facts: check dates, income level and any default.
7Conclude clearly with the consequence of default and the practical step to cure it.

Quickest way: Entity-Law-Duty grid

When to use it: Use it when the question gives a short fact pattern and you have limited time.

Write the entity in one line.
Write its law next to it.
Write three duties: keep accounts, get them audited, file the return or list.
Add one line on tax exemption if the question mentions tax.
Close with the consequence and your advice.

Common mistakes in Legal Framework for Accounts of Trusts and Societies

Applying the Companies Act to every non-profit entity
The paper is built around companies, so students default to company law.
Fix: Use the Companies Act only for a Section 8 company. Trusts and societies follow their own laws.
Saying the Societies Registration Act, 1860 requires full audited accounts
State Acts and the central Act get blended in memory.
Fix: State that the central Act requires an annual list of the governing body. Say state laws may add audit and return duties.
Mixing the old and new Income-tax Acts
Old Sections 11 and 12 are popular in notes and search results.
Fix: For June 2027 quote the Income-tax Act, 2025 as given in your material. Mention the old law only as a contrast.
Forgetting that exemption depends on registration and application of income
Students think a charitable object alone gives exemption.
Fix: List all conditions: registration, application of income, books, audit and return.
Quoting percentages or limits from memory
Limits change with amendments.
Fix: Quote a figure only when you are sure it matches the Act text. Otherwise state the rule in words.
Ignoring the practical conclusion
Students stop at the provision.
Fix: End with what the trustee, secretary or board must do and what happens on default.

Worked examples

Example 1

Shree Sewa Trust, a public charitable trust, runs a school in Pune. A beneficiary asks to see its accounts. The trustees refuse. Advise.

Show the solution

Entity: a trust, governed by the Indian Trusts Act, 1882 and the applicable state public trust law.
Duty: the trustee must keep clear and accurate accounts of the trust property.
Right: the beneficiary may ask for true and full information about the trust property and inspect accounts and vouchers.
Application: refusal to show the accounts breaches the trustees' duty.
Practical step: the trustees should allow inspection, and the beneficiary may approach the court if they refuse.

Answer: The refusal is wrong. The trustees must keep clear accounts and give full information to the beneficiary. The beneficiary can inspect them and may go to court if refused.

Example 2

Navjyoti Education Society, registered as a society, wants to claim income tax exemption as a charitable entity. List the compliances it must meet.

Show the solution

Entity: a society under the Societies Registration Act, 1860 or the state Act.
Society law duty: file the annual list of governing body members with the Registrar and follow any state law on accounts and returns.
Tax law: the society must be registered as required by the Income-tax Act, 2025 to claim exemption.
It must apply its income to charitable purposes and keep proper books of account.
It must get accounts audited when income exceeds the limit in the Act and file its return on time.
Conclusion: it must satisfy both its society law and the tax law to keep the exemption.

Answer: The society must file its annual list with the Registrar, keep books, register for tax, apply income to its charitable purposes, get an audit where required and file the return. Failure risks loss of exemption.

Exam tips

Begin every answer by naming the entity and its governing law.
Keep the old and new Income-tax Acts separate. Use the 2025 Act for June 2027.
Use a short table-like list in your answer: entity, law, duty, filing.
End with a conclusion and a practical compliance step, as the paper is case-based.
Avoid unsure figures. Write the rule in words if you cannot recall the exact limit.

Practice questions from Financial and Non-financial Reporting of Different Non-Corporate Entities

Legal Framework for Accounts of Trusts and Societies: frequently asked questions

Do trusts have to get their accounts audited?

The Indian Trusts Act, 1882 does not itself require a statutory audit. State public trust laws and the Income-tax Act may require it. Check the law that applies to the facts.

What does the Societies Registration Act, 1860 require every year?

It requires an annual list of the governing body members to be filed with the Registrar. State Acts may add audited accounts and returns.

Which law governs the accounts of a Section 8 company?

The Companies Act, 2013. The company must keep books, prepare financial statements, get them audited and file annual returns.

Which Income-tax Act should I use for June 2027?

Use the Income-tax Act, 2025 as amended by the Finance Act, 2026. Mention the old Act only to contrast.