Trusts’ income to come under NBR scanner

To open and keep continuing bank accounts against the income of trusts, every trust might have to submit proof of income tax returns mandatorily in the upcoming budget for the fiscal year 2023-24.

To curb evasion, prevent money laundering and end financing on terrorism, the government is likely to introduce a provision of submitting proof of income tax returns for the trusts and trust-related companies to banks, said sources in the finance ministry.

Income tax return filing has been made mandatory for Taxpayer Identification Number (TIN)-holders in FY23 to obtain 38 services, including opening and continuing bank accounts, and utility services.

Mandatory return submission has helped increase the number of return submission, curb evasion and widen the tax net, said ministry officials.

“Various companies formed trusts under different names for the purpose of tax evasion and completed transactions through bank accounts to conceal their own income. As a result, the trust does not file return,” said a high official of the finance ministry.

“Trusts and trust-related organisations are creating a scope for evading taxes,” he added.

“In absence of any specific agency for regular monitoring on financial transactions of trusts and trust-related organisations, trust funds are being used for terrorism financing and money laundering,” he said.

“If proof of tax return submission is being made mandatory against the incomes of trusts in the next budget, government’s revenue will be boosted and the move will also help prevent tax evasion,” the official hoped.