“Trust Registration” under trust Indian Registration Act 1982 by by Neha Mittal


Dear Professionals,

Trusts are not defined clearly by the income- tax act 1961. Registration of trust for a non-profit is well known and Trust can be formed by 2 or more people for a social cause. Trust may be defined as association having a definite cultural, Educational, economical, religious or social a main objective. Whatever, profit/surplus they may earn from economic activities are reinvested or spent on appropriate nonprofit activities.

WHAT IS TRUST?

Trust is registered and governed by Indian Trust Act 1882. In simple word, it is a financial vehicle which transfers a property from its owner to a trust for the lawful purpose.

In India, some societies are registered as a public trust. Often, you’ll even hear of the wealthy creating private trusts; this is done because of the tax-efficient nature of the trust (dividend distribution tax or minimum alternate tax do not apply). It is the easiest way to transfer than making a will. However, it does much involve more effort to register a trust than to write a will. There are no clear provisions available for dissolving a registered public trust.

Trusts are classified into 2 Categories:

  1. Public trust
  2. Private Trust

The public charitable trust is one of the possible forms of not-for-profit entity in India. Typically, public charitable trusts can be established for various purposes, including the relief of poverty, education, medical relief, provision of facilities for recreation, and any other object of general public utility. Public Trusts are generally irrevocable.


Typically, a public charitable trust must register with the office of the Charity Commissioner having jurisdiction over the trust (generally the Charity Commissioner of the state in which the trustees register the trust) in order to be eligible to apply for tax-exemption.  In the metro city of India, Trust can be registered in the office of Sub-Registrar.

ELIGIBILITY FOR TRUST REGISTRATION:

Minimum Two Trustees: Two Trustees and 1 settler (settler is also the author of the trust) are required to become the trustee of the Trust.

Name of Trust:  Name of such proposed trust is not required to be pre-reserved.

Social or Welfare Object: The object of the Trust shall be to promote Commerce, Art, Science, Sports, Education, Research, Social Welfare, Religion, Charity & Protection of Environment.  It intends to apply all its profit in promoting the objectives.

No Profit Distribution: Profits of Trust to be applied only for the promotion of object of the company for which it is formed and there is a prohibition on payment of dividend to its Trustee.

DOCUMENT REQUIRED FOR TRUST REGISTRATION:

  • Name of  Trust
  • Objects of the Trust
  • Registered Office Proof - Electricity bill of Delhi?
  • Identity Proof of trustee - Any one(voter Card/Driving License/Passport/Bank Statement/Bsnl Tel Bill)
  • Address Proof of trustee - Anyone(Gas Bill/Tele?phone Bill/Electricity Bill)
  • Any one trustee (Author)- UID  card
  • Latest photograph.

Documents

Identity Proof

Address Proof

Pan Card (Mandatory For Indian Nationals)

Yes

No

Passport (Mandatory For Foreign Nationals)

Yes

Yes

Driving License

Yes

Yes

Voters Id

Yes

Yes

Aadhaar Card

Yes

Yes


NOTE:

  • Physical Presence of Settler (settler is also the author of the trust))/all required at the time of Registration along with Original ID and original electricity bill (Trust will be registered).
  • Physical Presence of Two witnesses with original ID Proof at the time of Registration.

Steps to register the Trust: Various activities involved would be as follows for Trust Registration:

  1. Preparation of the Trust Deed:

The first step is to draft the Trust deed. The following details should be mentioned in Deed:

  • Name and address of the Settler (Settler is the person who is setting up the trust)
  • Name(s) and address (es) of the other trustees
  • Name of the trust (minimum 3 preference shall give)
  • Minimum and maximum number of trustees
  • Address of the registered office of the trust
  • Objectives of the trust
  • Rules and Regulations of the trust.

2. Parties to the trust:

Three parties (Two Trustees and 1 settler) are required to form the Trust.

3. Applicant /Author of the trust:

The author is the person who declares confidence in the Trust. The Name & Address of the author shall be mentioned in Deed.

4. Details of trustees /Members:

The trustee should not be a minor & be of sound mind. Mention full Name, Address, Occupation & Age, and designations of the Trustees / Members.

5.  The beneficiary of the Trust:

A person who is going to be benefitted by the formation of trust. Usually, Author himself is the Beneficiary or it is public at large.

6.  Objects of the Trust:

Trust can be formed for charitable purposes only. The detailed objective of Trust shall be incorporated indeed.

7.  Subject matter:

The subject matter of the trust is the property in respect of which the trust has been created. The subject matter shall be defined and property of trust shall be capable of disposition to create a valid trust.

8.  Registration of the trust by Trust Deed:

After preparation of Trust now another step is to register the Trust deed. NGO Registration is not compulsory but is needed to get the trust registered under the Income Tax Act for availing the exemptions and more over a deed is a prima facie evidence of the existence of a trust. The trust deed shall be submitted to the local registrar along with the one photocopy and settler shall sign all the pages.

9.   Obtaining PAN card of trust

Permanent Account Number (PAN) is allotted by the Income-tax Department to the Trust. These identification numbers are essential for smooth operation of Trust. These are applied along with Registered Trust deed and necessary Documents.

10.  The opening of Bank Account:

On submission of Registered trust deed & other essential documents, a bank opens a current account in name of the Trust, required for smooth running of Trust.

Ø Application for 80G and 12A certificate for tax benefits:

After valid trust registration, one shall go for 12A and 80G registration to get the Tax advantage.

 

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