Overview of Trust Registration
Trust Registration in India begins with the drafting of a Trust Deed. Trust Deed is the primary requirement in the process of Trust Registration in India. Trust Deed is formed on a non-judicial stamp paper; every state in India has fixed its own rate on the stamp duty. The applicants are required to book an appointment with the office of sub-registrar once he/she is done with the preparation of Trust Deed.
It is essential for all the trustees of the Trust to appear before the sub-registrar on the date of appointment along with the Trust Deed and two witnesses.
What is a Trust?
A Trust is an arrangement where owner or trust or of Trust transfers the property to a trustee. Such transfer of property is done for the benefit of a third party. The property is transferred to the trustee by the trust or along with a proclamation that the property should be held by the trustee for the beneficiaries of the trust.
The Indian Trust Act 1882, provides for the provisions related to Trust in India. The Trust Registration is advisable in India for obtaining the benefits.
In India, Trust is classified into two categories:
A Public Trust is the one whose beneficiaries include the common public at large. Furthermore, a Public Trust in India can be further subdivided into Public Religious Trust and Public Charitable Trust.
In India, a Private Trust is the one whose beneficiaries include individuals or families. Furthermore, a Private Trust in India can be subdivided into the following categories:
- A Private Trusts whose beneficiaries and requisite shares both can be easily determined;
- A Private Trusts whose both or either the beneficiaries or requisite shares cannot be easily determined.
What are the 12A and 80G Certificates in the process of Trust Registration in India?
An NGO or a trust can acquire a 12A certificate from the Income Tax Department of India. Thus, a Trust acquiring such a certificate from the Income Tax Department is exempted to pay income tax for the entire lifetime on the surplus income.
Also, a Non-Governmental Organization is required to obtain an 80G certificate. This 80G Certificate allows donors, that is, organizations or persons making donations to an NGO that is 80G certified to avail a certain deduction. Thus, such a deduction under 80G is given to the donors under Section 80G of the Income Tax Act of India.
Which is the Legislation governing Trust Registration in India?
A Trust in India is governed by the Indian Trusts Act, 1882. However, each state in India can formulate its own Trusts Act to govern such non – profit organizations like Trust.
Further, a Trust can receive projects and funds much like a Society. However, it is sometimes quite challenging to get projects and funds immediately after the Trust Registration in India. Gets Registered.
Hence, to acquire projects or obtain funds, a Trust needs to meet certain minimum eligibility criteria. Such criteria may include the relevant performance of a Trust, experience, age, and other essential parameters.
Furthermore, a Public Charitable Trust in India has to be registered with the office of the charity commissioner who has jurisdiction over the Public Trust.
What are the benefits of Trust Registration in India?
The primary reason behind creating a Trust in India is to indulge in some charitable activities and, at the same time, also avail the benefits of tax exemption. These charitable trusts are also called as Non-Profit Organizations.
A Trust formed in India has to be a legal entity if it wants to avail of all the benefits associated with the trust that are offered by the government. The Federal Laws and the Indian Trust Act makes it mandatory for all such entities to get registered under the Charitable Trust.
A Trust Deed is very necessary to register a charitable trust in India. Hence, a charitable registration is also called a Trust Deed.
The State and Federal Law Departments in India give a collection of assets to manage the common people and charitable associations. This procedure of collection of assets hugely helps those donors who want to lend the assets to the trusts, making the trustees fully expecting the receipt of tax benefits.
What are other important things one should consider before going for Trust Registration in India?
The other important things one should consider before going for Trust Registration in India are as follows:
Trust Registration in India cannot be done without the most vital document called the Trust Deed. A Trust Deed explains the primary reason behind the existence of the Trust in India. The document also contains the list of all its beneficiaries and narrates the power of the trustees. At the time of signing of the Trust Deed, a minimum of two witnesses are required.
Private Trust vs. Public Trust
Private Trusts in India are governed and regulated by the Indian Trusts Act, 1882. On the other hand, the Public Trust controls their functioning themselves except in the state of Maharashtra, where the Bombay Public Trusts Act, 1950, is applicable.
Number of Trustees
No maximum limit is defined for the total number of trustees for a Trust in India. But at least two trustees are essentially required at the time of Trust Registration in India. The Trust Deed of a Trust ought to have an arrangement regarding the administration of the Trust along with the strategy of removing or delegating the members.
After the Trust Registration process in India, the public trusts can enjoy the privileges offered by the government. Public Trusts in India are also eligible to avail of the tax exemption benefits.
What are the documents required for Trust Registration in India?
The essential documents required to be submitted at the time of Trust Registration in India are as follows:
A Trust Deed is the most important document which the applicant will require at the time of Trust Registration in India.
A Trust Deed contains the information which is as follows:
- The motive of the Trust;
- Information of the trustees and settler like Name, Name of Father, Age, Address, Occupation, Email Address, Mobile Number, Designation;
- Total number of the Trustees;
- Trust’s Registered Office address;
- Rules and regulations that will be strictly followed by the Trust;
- Proposed name of the Trust;
- A copy of identity proof of the trustee and settlor;
- Passport size photograph of the trustee and settlor;
- Presence of the Settler along with their original identity proof and two witnesses at the time of Trust Registration in India. Some states in India have made the presence of trustee mandatory as well.
- Self-attested copy of the identity proof or ID Proof of the settler such as Aadhaar card, voter ID, passport, driving license or any such photo ID;
- Self-attested copy of the identity proof of each trustee such as Aadhaar card, passport, voter ID, driving license or any such photo ID;
- PAN card;
- Address Proof of the registered office of the Trust such as electricity bill, water bill or registration certificate;
- No Objection Certificate signed by the landowner.
What is the Process of Trust Registration in India?
The procedure of the Trust Registration in India is as follows:
Choose an Appropriate Name
This is the first step in the procedure of Trust Registration in India. Additionally, the name so suggested by the applicant should not come under the restricted list of the names as per the provisions of the Emblems and Names Act, 1950
Decide the Authors and Trustees
There is no specifically defined provision with regards to the number of settlers or authors. However, in most of the cases, there is generally only one author of a Trust.
Furthermore, there is no limit on the maximum number of the trustees of a Trust. But a minimum number of two trustees are necessary to form a Trust in India. Also, generally, the author cannot be the trustee of a Trust. And the author is required to be a resident of India.
Formulate Memorandum of Association and Trust Deed
A Trust Deed is legal evidence of the existence of the Trust. It contains the rules and regulations of the Trust. This document also contains the laws regarding the removal, changes, or addition of the Trustees to the Trust.
On the other hand, Memorandum of Association or MOA represents the charter of the Trust. It defines the relationship between the Trust or and the Trustees and also specifies the primary objectives for which such a Trust is formed by the applicants. Such a document of a Trust should contain the addresses, names, and occupations of all the members along with their signatures.
Preparation of Trust Deed on a Stamp Paper
As a Trust, the applicant is required to prepare the Trust Deed on a stamp paper. The value of the stamp paper is of a certain percentage of the total value of the property of the Trust. Furthermore, this percentage value of the Trust varies from state to state.
In addition to this, the applicant is required to pay a fee of Rs. 1100. Out of this Rs. 1100 amount of Rs. 100 is the Trust Registration fee and other Rs. 1000 are the charges of keeping a certified copy of the Trust Deed with the Sub-Registrar.
Once the applicant submits all the required papers, he/she can collect a certified copy of the Trust Deed. Such a copy can be collected within a time period of one week from the office of the Registrar.
Submission of Trust Deed to the Registrar
After the receipt of the copy of the Trust Deed, the applicant is required to submit the same along with properly attested photocopies of all the necessary documents with the office of the local registrar.
Furthermore, the settler should put his/her signatures on every page of the photocopy of the Trust Deed. Also, it is mandatory for all the settlers as well as the two other witnesses to be physically present along with the identity proofs (original as well as the self-attested photocopy of the same) at the time of Trust Registration in India. However, the physical presence of Trustees of the Trust is debatable.
Obtain the Certificate of Registration
After the submission of the Trust Deed with the Registrar, the registrar will retain the photocopy of the Deed and return the original registered copy of the Trust Deed.
After the completion of all the formalities, a Certificate of Registration will be issued to the applicant. Such a Certificate of Registration will be issued within a minimum of seven working days.
How will Swarit Advisors help you?
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Frequently Asked Questions
In India, trust is more like an akin to a legal arrangement between the author and the trustee.
No, a registered Trust is not a separate legal entity, unlike a company.
Yes, Under Section 77 of the Indian Trust Act, 1882, a Trust can be terminated or extinguished if the purpose of the registered Trust becomes unlawful.
Yes, a revocable Trust in India can be dissolved, but as per the terms and conditions specified in the trust deed.
Trusts are usually set up for personal purposes or private purposes, whereas, on the other hand, the Corporations are set up for business and profit purposes.
In India, Trust has beneficiaries, who are the people for the benefit of whom the trust is established and will be handled.
Trustor or Settlor prepares the Trust Deed in India.
Settlor, Trustee, and Beneficiaries are the 3 parties of a Trust.
Yes, it is compulsory to get a Trust registered in India.
Yes, a revocable Trust Deed can get amended.
The steps involved in the process to register Trust in India are Choose an Appropriate Name; Decide the Authors and Trustees; Formulate MOA and Trust Deed; Preparation of Trust Deed on a Stamp Paper; Submission of Trust Deed to the Registrar; Obtain the Certificate of Registration.
The Indian Trusts Act, 1882, is the governing law for a Trust in India.
The 2 different types of Trust are Private Trust and Public Trust.
The key duties of a Trustee are Fiduciary Duty; Duty of Care; Duty of Intimating the Beneficiary of any Form of Changes made in the Trust; and the Duty to Administer the Trust Property.
The person who creates the trust is a Trustor. In contrast, the person who has the responsibility of managing the trust for the beneficiary is known as Trustee.
Both civil and criminal penalties may be imposed on the Beneficiary for Breach of Trust.
Yes, the working and operations of an NGO and Trust are the same.
A Trust already operating cannot close its operations and management. However, in the case of disqualifications on shareholders, trust can be closed.