The government is reportedly evaluating the possibility of extending Minimum Alternate Tax (MAT) provisions to certain trust structures, particularly those engaged in commercial activities or holding significant business interests. While trusts in India are typically governed by the Indian Trusts Act and may enjoy tax exemptions under Sections 11 to 13 of the Income Tax Act if they operate for charitable purposes, there is increasing scrutiny of entities that are structured as trusts but engage in profit-generating ventures or asset-holding arrangements. The proposed move aims to ensure tax parity between trusts and corporate entities operating in similar commercial spheres.

Officials have noted that some private business families and investment groups use trust structures to manage assets, channel income, or benefit from tax arbitrage strategies. While these trusts may legally claim exemption from regular corporate taxation, they often report substantial book profits in their financial accounts, especially when holding shares, real estate, or operating subsidiaries. Bringing such entities under the MAT framework—by applying a minimum tax on their book profits—would prevent complete tax avoidance and align with the government’s broader efforts to plug revenue leakages and harmonize the tax base across organizational forms.

If adopted, the extension of MAT to trust structures would likely be targeted and conditional, excluding purely charitable institutions and focusing instead on business-oriented or hybrid trusts that resemble corporate entities in function and scale. Tax experts believe that detailed guidelines will be crucial to distinguish between exempt and non-exempt trusts, and stress the need for clear carve-outs to preserve the integrity of the nonprofit sector. Any formal proposal is expected to undergo industry consultation and may be introduced via amendment in a future Finance Bill or a detailed CBDT circular.