Registration for Charitable Trusts: A Step-by-Step Guide

Registration for Charitable Trusts
Shivam Narwal
| Updated: Apr 03, 2023 | Category: Trust

Starting a charitable organization is a noble way to contribute to society and make a positive impact on people’s lives. Charitable trusts are an excellent way to support various causes, including education, healthcare, poverty alleviation, and environmental protection. Registering a charitable trust is a crucial step in establishing your organization and enabling it to receive tax benefits, donations, and other forms of support. We will walk you through the steps of setting up a charity trust in this blog post and emphasise the crucial conditions you must meet. We’ll also offer some sage advice on how to ensure a simple and trouble-free registration procedure.

Understanding Charitable Trusts

Before we dive into the registration process, let’s first understand what charitable trusts are and their significance. A charitable trust is a legal entity created to promote charitable purposes and provide benefits to the public. It is different from a private trust as it is not established for the benefit of a specific individual or family.

Charitable trusts can be set up as either public or private. Public charitable trusts are created for the benefit of the public at large and are eligible for tax exemptions under section 12AA of the Income Tax Act, 1961[1]. Private charitable trusts, on the other hand, are created for the benefit of a particular group of individuals or family and do not qualify for tax exemptions.

Charitable trusts can support various causes, including education, healthcare, poverty alleviation, and environmental protection. They can receive donations from individuals, corporations, and other organizations and use the funds to support their charitable activities.

Essential Requirements for Registering a Charitable Trust

After gaining a fundamental grasp of charitable trusts, let’s examine the crucial conditions for establishing a charitable trust in India. To register a charitable trust, you need to fulfill the following conditions:

  1. Trust Deed: The first step in registering a charitable trust is to prepare a trust deed. A trust deed is a legal document that outlines the objectives, rules, and regulations of the trust. It should include the name of the trust, its objectives, the names of the trustees, and the rules governing the trust’s operations. The trust deed should be printed on non-judicial stamp paper and signed by all the trustees in the presence of two witnesses.
  2. Trustees: A charitable trust should have at least two trustees who are Indian citizens and above 18 years of age. The trustees are responsible for managing the trust’s affairs and ensuring that its objectives are achieved. The trustees should be people of integrity and should not have a criminal record.
  3. Registered Office: A charitable trust should have a registered office in India. The registered office is the address where all the official communication of the trust will be sent. The registered office should be a physical address and not a post office box.
  4. Name: The name of the charitable trust should be unique and not similar to any other organization registered under the same name. The name should also not violate any copyright or trademark laws.
  5. Bank Account: A charitable trust should have a bank account in the trust’s name. The bank account will be used to receive donations and other funds for the trust’s operations.

Steps for Registering a Charitable Trust

Now that we have looked at the essential requirements let’s dive into the steps involved in registering a charitable trust in India.

Step 1: Prepare the Trust Deed

The first step in registering a charitable trust is to prepare the trust deed. As mentioned earlier, the trust deed should include the name of the trust, its objectives, the names of the trustees, and the rules governing the trust’s operations. The trust deed should be printed on non-judicial stamp paper and signed by all the trustees in the presence of two witnesses.

Step 2: Get the Trust Deed Notarized

Once the trust deed is prepared, it needs to be notarized by a notary public. Notarization involves verifying the identity of the trustees and attesting to the authenticity of the signatures on the trust deed.

Step 3: Apply for PAN and TAN

After the trust deed is notarized, the next step is to apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the trust. PAN is a unique identification number issued by the Income Tax Department, while TAN is a 10-digit alphanumeric number used for tax deduction and collection.

Step 4: Apply for 12AA Registration.

The next step is to apply for 12AA registration under the Income Tax Act, 1961. This registration is required to avail of tax exemptions on donations received by the trust. The application for 12AA registration should be made to the Commissioner of Income Tax (Exemptions) in the jurisdiction where the trust is located. The application should be accompanied by the following documents:

  • Copy of the trust deed
  • Copy of PAN and TAN
  • Copies of the identity and address proof of the trustees
  • Details of the trust’s activities and sources of funding

Once the application is submitted, the Commissioner of Income Tax (Exemptions) will verify the documents and inspect the trust’s premises before granting the 12AA registration.

Step 5: Apply for 80G Registration.

If the trust wants to avail of tax benefits on donations received from donors, it needs to apply for 80G registration under the Income Tax Act, 1961. This registration allows donors to claim tax deductions on donations made to the trust. The application for 80G registration should be made to the Commissioner of Income Tax (Exemptions) in the jurisdiction where the trust is located. The application should be accompanied by the following documents:

  • Copy of the trust deed
  • Copy of PAN and TAN
  • Copies of the identity and address proof of the trustees
  • Details of the trust’s activities and sources of funding

Once the application is submitted, the Commissioner of Income Tax (Exemptions) will verify the documents and inspect the trust’s premises before granting the 80G registration.

Tips for a Smooth and Hassle-free Registration Process

Registering a charitable trust can be a tedious process, but with proper planning and preparation, you can ensure a smooth and hassle-free registration process. Here are some pointers to assist you:

  1. Research the Requirements: Before starting the registration process, research the requirements for registering a charitable trust and ensure that you have all the necessary documents and information.
  2. Plan Ahead: Plan ahead and give yourself enough time to complete the registration process. Don’t leave things to the last minute as this can lead to delays and complications.
  3. Seek Professional Help: If you are unsure about any aspect of the registration process, seek professional help from a CA or lawyer. They can assist you in the procedure and make sure you adhere to all legal standards.
  4. Maintain Proper Records: Once the trust is registered, it is essential to maintain proper records of all the transactions and activities. This will help you comply with legal requirements and avoid any legal issues in the future.
  5. Comply with Regulations: Ensure that you comply with all the regulations and laws governing charitable trusts. This includes filing tax returns, submitting annual reports, and maintaining proper accounting records.

Benefits of Registering a Charitable Trust

Registering a charitable trust can bring many benefits, both for the trust and for the community it serves. Here are some of the benefits of registering a charitable trust:

  • Tax Exemptions: One of the primary benefits of registering a charitable trust is that it can avail of tax exemptions under the Income Tax Act, 1961. This includes exemptions on income, donations, and capital gains. By registering as a charitable trust, you can ensure that your organization is eligible for tax benefits, which can help you attract more donors and raise more funds.
  • Increased Credibility and Trust: When you register your charitable trust, you establish it as a legal entity recognized by the government. This can increase its credibility and trustworthiness in the eyes of donors, volunteers, and other stakeholders. By registering as a charitable trust, you demonstrate your commitment to transparency, accountability, and good governance, which can attract more supporters and help your organization grow.
  • Access to Funding and Resources: Registered charitable trusts are eligible to apply for funding from government agencies, corporate donors, and international organizations. By registering your trust, you can access a wider range of funding and resources, which can help you expand your programs, hire more staff, and reach more beneficiaries. Registered charitable trusts may also be eligible for loans and other financial assistance from banks and financial institutions.
  • Legal Protection: Registering a charitable trust provides legal protection to the trustees and the organization. As a registered entity, the trust has a separate legal identity from its trustees, which means that the trustees are not personally liable for the debts and obligations of the trust. This can protect the trustees’ personal assets and ensure that the organization is financially secure.
  • Increased Visibility and Reach: By registering as a charitable trust, you can increase your organization’s visibility and reach. Registered trusts are listed on government websites, which can help potential donors and supporters find your organization. Registered trusts may also be eligible for tax benefits and other incentives, which can help you attract more donors and raise more funds.

Conclusion

In conclusion, establishing a charitable trust is a noble way to contribute to society and make a positive impact on people’s lives. It not only allows you to support various causes but also enables you to receive tax benefits, donations, and other forms of support. However, the process of registering a charitable trust can be a daunting task, and it’s essential to fulfill all the requirements and follow the proper procedure to ensure a smooth and hassle-free registration process.

By understanding the essential requirements and steps involved in registering charitable trusts, you can be confident in establishing a legally recognized organization that can make a difference in people’s lives. It all starts with preparing a trust deed, getting it notarized, applying for PAN and TAN, and registering for 12AA and 80G under the Income Tax Act, 1961.

Once your charitable trust is registered, you can start accepting donations and carrying out your charitable activities. Remember to keep accurate records of all your transactions, file tax returns, and comply with all legal requirements. By doing so, you can ensure that your charitable trusts remain in good standing and continues to make a positive impact in the years to come. In a world where there is so much need and suffering, setting up a charitable trust is a powerful way to create a brighter future for all. So, take the first step today and start making a difference in your community and beyond.

Also Read: Checklist & Documents Required for Trust Registration in India

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Shivam Narwal

Shivam Narwal, a motivated final year BBA LLB law student at Chandigarh University, has started his legal career at Swarit Advisors as a legal researcher. With a strong focus on thorough and accurate research, Shivam is dedicated to delivering exceptional results. Throughout his studies, he has shown a deep understanding of the legal system and a drive to excel in the field of Law. 

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