Definition and Nature of Corpus for a Trust

Corpus refers to the capital fund of a trust that is intended to be maintained permanently. It is created through donations with specific directions from the donor to form part of the capital.

• Corpus fund is treated as capital and is not to be spent on regular expenses
  
• It is excluded from the income computation for tax purposes under Section 11
  
• Donor must give a clear written direction for the amount to be considered corpus
  
• Corpus donations must be recorded separately in books of accounts
  
• These funds should be invested only in the modes specified under Section 11(5)

Minimum Corpus Requirement in Law

There is no specific minimum corpus mandated by central legislation for the creation of a trust. However, states and registration authorities may have practical expectations.

• Indian Trusts Act, 1882 does not prescribe any minimum amount for corpus
  
• A nominal amount such as Rs. 1,000 or Rs. 10,000 is generally accepted
  
• State public trust offices may suggest a threshold based on purpose and location
  
• Corpus amount must reflect viability for carrying out charitable activities
  
• Registrar may seek justification of sufficiency during trust registration

Practical Corpus Requirement for Registration

Though no statutory minimum is fixed, registrars often expect a reasonable initial fund. This helps to demonstrate the genuine intent and operational capability of the trust.

• Initial corpus of Rs. 25,000 to Rs. 50,000 is commonly preferred by authorities
  
• Some states like Maharashtra expect Rs. 1 lakh or more based on activity scale
  
• Larger corpus adds credibility and strengthens registration approval chances
  
• Trust deed should clearly mention the amount contributed as initial corpus
  
• Cash or bank draft is usually deposited at the time of registration submission

Corpus Contribution by Settlor or Founder

The settlor or founder must contribute an initial amount to establish the trust. This amount forms the base corpus and is mentioned in the trust deed.

• Contribution must be made by the settlor from lawful sources
  
• The amount should be irrevocably transferred to the trust as a donation
  
• Corpus donation by the settlor should be specified as permanent capital
  
• Should be deposited into a bank account opened in the trust’s name
  
• Proof of transfer and acknowledgment of receipt are to be documented

Registration and Tax Exemption Implications

For obtaining 12AB registration and 80G approval, a reasonable corpus is helpful. It reflects the financial commitment of the founders and operational readiness.

• Authorities may review initial funds to assess sustainability of the trust
  
• 80G approval is influenced by corpus stability and asset base
  
• Separate disclosure of corpus funds is required in Form 10A or 10AB
  
• Misuse or underutilization of corpus affects eligibility for tax benefits
  
• Bank statements and auditor certifications may be needed for validation

Utilization and Preservation of Corpus

Corpus funds must be preserved and invested prudently to generate income. These funds are not meant to be spent and should only be used in accordance with trust law.

• Invest in prescribed modes like fixed deposits or government securities
  
• Do not withdraw or spend corpus funds without proper approvals
  
• Any interest earned can be used for charitable activities if not added to corpus
  
• Maintain separate ledger accounts for corpus and other donations
  
• Unauthorized use of corpus leads to disqualification from tax exemptions

Documentation and Accounting of Corpus Fund

Proper documentation and accounting of corpus are essential for audit and legal scrutiny. Clear distinction must be maintained between corpus and general funds.

• Mention corpus donation in the trust deed and donor letter
  
• Maintain separate registers and ledger heads for corpus transactions
  
• Reflect corpus amount in the balance sheet under capital fund
  
• Use audit certificates to confirm corpus treatment annually
  
• Preserve all documents supporting the formation and growth of corpus fund