Registration Process under Indian Trust Act

Indian Trust
Shivam Narwal
| Updated: Apr 05, 2023 | Category: Trust

Understanding the registration process under the Indian Trust Act is crucial if you’re seeking to establish a trust in India. A trust is a type of legal body established for a person or group of individuals, and it can serve several functions, such as philanthropic, religious, and educational ones.

What is the Indian Trust Act?

In India, establishing and administrating trusts are regulated under the Indian Trust Act[1]. It was passed in 1882 and has undergone numerous revisions over the years. The definition of a trust according to the Act is “a duty attached to the ownership of property and arising out of a confidence reposed in and accepted by the owner, or declared and acknowledged by him, for the benefit of another, or of another and the owner.”

Why is registration important?

A trust must be registered for it to be legally recognized and acquire a legal organisation’s status. This indicates that the trust can possess assets, sign contracts, and file or defend legal actions in its name. For donors and beneficiaries, registration also offers a degree of accountability and openness.

Registration Process

The registration process for a trust under the Indian Trust Act is as follows:

Step 1: Prepare the Trust Deed: The first step in the registration process is to prepare a trust deed. The trust deed should contain the following information:

  • Name of the trust
  • Objectives of the trust
  • Names and addresses of the trustees
  • Beneficiaries of the trust
  • Details of the property that the trust will hold
  • Rules for the management of the trust

Step 2: Get the Trust Deed Notarized: Once the trust deed has been prepared, it should be notarized by a notary public. The notary public will verify the identities of the trustees and witnesses and attest to the authenticity of the trust deed.

Step 3: Obtain the PAN Card for the Trust: The trust should obtain a permanent account number (PAN) card from the Income Tax Department. A PAN card is necessary for opening a bank account and other financial transactions.

Step 4: Apply for Registration: The trust should then apply for registration with the Registrar of Trusts. The application should be made on a prescribed form and should be accompanied by the following documents:

  • Copy of the trust deed
  • Copy of the PAN card
  • Passport-size photographs of the trustees
  • Proof of address of the trustees
  • Proof of ownership of the property held by the trust

Step 5: Verification and Inspection: Once the application has been submitted, the Registrar of Trusts will verify the information provided in the application and conduct an inspection of the registered office of the trust.

Step 6: Registration Certificate: A registration certificate will be granted to the trust if the Registrar determines that all conditions have been satisfied. The following details will be on the registration certificate:

  • Name of the trust
  • Registration number
  • Date of registration
  • Objectives of the trust
  • Names and addresses of the trustees
  • Beneficiaries of the trust

Timeframe and Cost

The timeframe for the registration process varies depending on the state in which the trust is registered. Generally, it takes 1-3 months for the registration process to be completed. The registration cost also varies depending on the state and the property value held by the trust. Generally, registration costs range from Rs. 200-5000.

Annual Compliance

Once the trust is registered, it must comply with certain annual compliance requirements. These include:

  • Filing of annual income tax returns: The trust must file its income tax returns every year, regardless of whether it has any taxable income.
  • Maintaining proper books of accounts: The trust must maintain proper accounts that accurately reflect its financial transactions. These books must be audited by a qualified auditor every year.
  • Conducting annual general body meetings: The trust is required to hold an annual general body meeting of its trustees and beneficiaries, where the trustees report on the activities of the trust and its financial position.
  • Filing of the annual report: The trust must file an annual report with the Registrar of Trusts, providing details of its activities and financial position for the previous year.

Failure to comply with these annual compliance requirements can result in penalties and the cancellation of the trust’s registration.

Types of Trusts under the Indian Trust Act

Under the Indian Trust Act, two main types of trusts can be registered:

  1. Public Trusts: Public trusts are created for the benefit of the general public or a particular section of the public. They are usually established for charitable, religious, or educational purposes. Public trusts can be registered with the Charity Commissioner’s Office in the state in which they are located.
  2. Private Trusts: Private trusts are created for the benefit of a particular individual or group of individuals. They are usually established for estate planning or to provide for the needs of a family member. Private trusts can be registered with the Registrar of Trusts.

Advantages of registering a trust

  1. Legal recognition: The trust is given legal recognition and the status of a legal entity through registration. As a result, the trust is able to possess assets, sign contracts, and file or defend legal actions under its own name.
  2. Tax benefits: According to the Income Tax Act, registered trusts are qualified for tax incentives. Section 80G of the Income Tax Act allows for tax deductions for donations given to registered trusts.
  3. Credibility: Registration provides a level of transparency and accountability, which enhances the credibility of the trust in the eyes of donors and beneficiaries.
  4. Protection of assets: Registration protects the assets of the trust from any legal disputes or claims.
  5. Perpetual existence: A registered trust enjoys perpetual existence, which means that it can continue to exist even after the death of its founder or trustees.

Disadvantages of registering a trust

  1. Cost and time-consuming: The registration process can be time-consuming and requires the preparation of several documents. The cost of registration also varies depending on the state and the value of the property held by the trust.
  2. Annual compliance: Registered trusts are required to comply with certain annual compliance requirements, which can be a burden for smaller trusts.
  3. Public disclosure: Registered trusts are required to file annual reports and disclose certain information, which can compromise their privacy and confidentiality.

Conclusion

Setting up a trust in India can provide various benefits, including legal recognition, tax benefits, credibility, and protection of assets. The Indian Trust Act governs the creation and management of trusts in India, and the registration process involves preparing a trust deed, getting it notarized, obtaining a PAN card for the trust, and applying for registration with the Registrar of Trusts. The registration process can take 1-3 months, and the cost varies depending on the state and the value of the property held by the trust. Once registered, the trust must comply with certain annual compliance requirements, including filing annual income tax returns, maintaining proper books of accounts, conducting annual general body meetings, and filing an annual report with the Registrar of Trusts.

There are two main types of trusts that can be registered under the Indian Trust Act: public trusts and private trusts. Public trusts are created for the benefit of the general public or a particular section of the public, while private trusts are created for the benefit of a particular individual or group of individuals.

Overall, registration of a trust provides a level of transparency and accountability, which is important for donors and beneficiaries. It also gives the trust the status of a legal entity, enabling it to own property, enter into contracts, and sue or be sued in its own name. As such, registration can be a valuable tool for individuals or organizations looking to establish a trust for charitable, religious, or educational purposes, for estate planning, or to provide for the needs of a family member.

Also Read:
Formation of a trust under the Indian Trust Act
Trust Registration Process under the Indian Trust Act 1882 – An Overview

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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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