Charitable institution means a public or private nonprofit, tax-exempt entity organised for charitable or public welfare purpose. These organisation depends on partly on donations and partly on business. The donations which are given in these institutions represents the major form the corporate philanthropy. If the institutions exempted from tax liability then the all the income derived from the institutions should be used for public purpose. For example 1For example, in many countries of the Commonwealth, charitable organisations must demonstrate that they provide a public benefit.

It is essentially a way to setup your assets is to benefit you, your beneficiaries and a charity.
Mainly there are two types of charitable trust

• Public trust and
• Private trust.

Public trust is an expressed trust made to benefit the body of public, in private trust the beneficiaries are narrow and divided in to specific groups e.g. the employees of the organisation.
Public charitable trust governs in India under the Charitable and Religious trust act 1920, the religious endowment act 1863, The Charitable endowment act 1890 and the Bombay trust Act 1950. In the same, private charitable trust governed by the Indian Trust Act 1882.

The expression charitable purpose has been defined under Section 2(15) of the Act to include:

1. relief of the poor,
2. education,
3. medical relief,
4. preservation of environment (including water sheds, forests and wild life)
5. preservation of monuments or places or objects of artistic or historic interest and (f) any other object of public utility

In India charitable trust's play a significant role in promoting economic developments and the social welfare objectives of the government. Their outrage and more localise approach helps to identify the needy and land a supporting hand. For this reason Indian government has provided various tax incentives and exemptions to charitable institutions.

What constitutes a valid trust.
In order to constitute a valid dedication for charitable purpose no registration is necessary if the trust relates to movable property. But if the trust is related to immovable property worth more than 100 rupees, the provision of section 17(1) of Indian Registration Act 1908 read with section 123 of Transfer of Property Act 1882 must be complied. The application of registration should in a manner which is prescribed in FORM NO. 10A.

In the case of HANUMANTRAM RAMNATH VS. CIT3 Hon'ble Kania J. Observed these three certainties :
A declaration sufficient to show an intention to create a trust by settlor; (the declaration must be binding on him.)
Setting apart definite property and the settlor depriving himself of the ownership thereof ;
A statement of the object for which the property is thereafter to be held.

In the case of COURT RECEIVER VS CIT. The Bombay high court reiterated the conditions which are necessary for creating the valid trust.
The said conditions are:

1. Intention on the part of author of trust to create a trust;
2. The trust property or the subject of the trust;
3. Purpose or the object of the trust ; and
4. Beneficiaries under the trust.

Thus, neither formal deed nor any other writing is necessary to constitute a charitable or religious trust. It is indeed true, a trust may be created by any language sufficient to show the intention and no technical words are necessary.

Charitable institutions be exempted from tax liability
In order to claim exemption from income tax under section 11 of the Act, a trust or institution which has been validly created or established must satisfy certain conditions which are enumerated in section 12A and 13 of the Income Tax Act,1961. If the charitable institutions or trusts is established for charitable or for religious purpose than the income derived from these institutions should be exempt from tax liability in that manner which is defined under section 11 of Income Tax Act 1961.

Section 11 of Income Tax Act defines that:
Income from property held for charitable or religious purposes.

1.  Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person
   in receipt of the income:
   
   1. income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of [fifteen] per cent of the income from such property;
       
   2. income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of [fifteen] per cent of the income from such property;
       
   3. income [derived] from property held under trust:
      
      1. created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and
      2. for charitable or religious purposes, created before the1st day of April, 1952, to the extent to which such income is applied to such purposes outside India:
         Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income;
          
   4. Income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution.]
      [Explanation: For the purposes of clauses (a) and (b):
      
      1.  In computing the [fifteen] per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income;
      2. if, in the previous year, the income applied to charitable or religious purposes in India falls short of [eighty-five] per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount:
         
         1. for the reason that the whole or any part of the income has not been received during that year, or
         2. for any other reason,

For the more clarity on the taxation scheme defined under section 11.

No exemption from tax liability if below mentioned conditions are not satisfied

• If the entire income earned from the charitable institutions used for their personal benefit not for the welfare of society
• If the income of charitable Trust or institution used for promoting particular caste or community.
• The income derived from these institutions wholly or partly and the property is used for the benefit of specified person.
• Income from these trusts or institutions not invested in the medical, educational or religious purpose, they are running these institutions to a specified persons.
• If these institutions running their separate business which not in respect of societal or welfare purposes then they have to maintain separate books of accounts

The meaning of the word 'Specified person' which is used in above para is:

• Founder of the trust or charitable institution.
• If the founder of he trust or charitable institution is a person of Hindu Undivided
• Family, then the member of such Hindu Undivided Family.
• Manager or the trustee of the trust.
• Relative of the founder of trust or charitable institution who has given contribution in the institution.
   

The expression religious purpose is not defined anywhere in the Act . It means the activities which are necessarily associated with religion and includes the advancement, and propagation of religion and its tenets. Income of these institutions should be exempted from tax because it may be for the benefit of particular community and society at large.

Charitable trust or the non profit organisations exempted from tax liability, either it is sales tax or property tax these organisations are not paying any taxes due to this these institutions are able to readily raise the money. Individuals or group of individuals established the non-profit organisation of charitable institution to reduce their tax liability. These charitable institutions provide the relief for public advancement, and welfare of society that's why the income of these institutions is exempted from tax liability.

But in most the cases the investors run their trust or charitable institutions to avoid their tax liability and taking the advantage of loopholes. There are many persons who are deriving huge income in the name of trust and charitable institutions and tare not paying any taxes. Which causes loss to the government. They government have to take steps to prevent these kind of activities. Those persons who are doing these kind of activities, government have to take strict by imposing fine and penalty against
 
them. By establishing these institutions, if the owner of the trust aims to hide or falsely reporting the income to reduce their tax liability be called as tax evasion. If the person is not paying any tax of paying less amount of tax considered to be tax fraud. Tax evasion is illegal and punishable in India several penalties or punishments also be imposed.

For example: 5BCCI (Board of Control for Cricket in India) was registered as a charitable institution, which is no longer considered a charitable organisation for assessing income, owes over Rs.371 crore as tax to the government.And this figure could be even higher as the Income Tax Department is yet to assess the income of one of world's richest sporting bodies for the last two fiscal.

For assessment year 2009-10, the BCCI's income stood at over Rs.964 crore on which the IT Department demanded a tax of over Rs.413 crore.

Paid only Rs.41.91 crore
But the BCCI paid only Rs.41.91 crore. As a result, the BCCI still owes over Rs.371.67 crore to the government as tax for 2009-10, reveals the information gathered under the Right to Information by activist S.C. Aggarwal.

Notably, the department is still to assess the income and tax status of the BCCI for the past two years (2010-11 and 2011-12).

In the assessment year 2007-08, the BCCI's total income stood at over Rs.274 crore on which it paid income tax worth Rs.118 crore.

But its income surged to Rs.608 crore in 2008-09, while the tax also increased to Rs.257 crore.

Notably, the BCCI used to get income tax exemption as a charitable organisation but now the government has withdrawn this exemption and the cricketing body's earnings now come under the head business income.

Withdrawn
The assessee (BCCI) used to claim exemption under Section 11 of the I-T Act 1961, available for charitable organisations. The department has withdrawn registration under Section 12 of the IT Act 1961 and rejected assessee's claim for exemption under Section 11 of the I-T Act 1961.
The department has assessed the BCCI's income under the head 'Business Income', the department said in its reply.

Conclusion
As per the above discussion, a charitable trust may be created for the relief of poverty, the advancement of education or religion, the promotion of health, governmental or municipal purposes, or other purposes the achievement of which is beneficial to the community. Government should have to promote such institutions for the sake of mankind and uphold the values of constitution of India.The Preamble

of constitution of India emphasise India, a socialist and republic country and its objective is to provide social, economical and political justice. To achieve such goals not only government but individuals or group of individuals have to come forward, to make efforts for the charitable purpose. If the income derived from these institutions not using for the societal welfare, then they should be taxed and the penalty should also be imposed for not paying tax. Government should have to exempt tax liability only from those institutions which are genuine and reliable and working for the advancement of public and religious purposes.

End-Notes:

1. https://en.wikipedia.org/wiki/Charitable_organization
2. https://taxguru.in/income-tax/charitable-purpose-215-income-tax-act-1961.html? __cf_chl_managed_tk__=pmd_cTlI2r.MrXasNZ_Bdzt4MIwZFpJXznIy08jBCXynI4c-1631903750-0- gqNtZGzNAvujcnBszQoR
3. (1946(14) ITR 716,718 (BOMBAY) 4 INCOME TAX ACT, 1961
5. https://www.thehindu.com/sport/cricket/bcci-not-a-charitable-organisation/article2910033.ece