With the government contemplating amendments in the pre-independence enacted Indian Trust Act, 1882, the trusts will have greater flexibility with their investment decisions.
According to present law, registered trusts can invest their resources either in securities notified by government or prescribed by the trust’s charter or under a high court ruling. The investment options prescribed mostly refer to the British Crown, the securities issued by the then governor general and hence are not sufficient in today’s context.
Moreover, while the newer trusts have framed their charters with wide-ranging options to provide for freedom in investment decisions, the older trusts find it hard to meet their investment needs in the present scenario.
The Income Tax Act makes it mandatory for the registered trusts to invest 85% of the funds received in a year in specified securities in order to get tax exemption. Thus the trusts have huge resources for investment purposes.
The amendment in the Act will necessarily open up a new investment gateway for Indian trusts thereby helping in capital appreciation, mobilisation of funds in economy and optimum utilisation of resources . The trusts can also take advantage of investment opportunities in booming sectors like capital market and real estate.
via economic times