Registration for Trust Formation in India

Registration for Trust Formation in India involves establishing a legal entity where assets are managed by trustees for the benefit of designated beneficiaries.

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Four Steps to Get Your Trust Registration

Fill the Form

Provide business details

Add to cart

Pay the required fee online

Submit Documents

Upload required papers

Certificate delivery

Official Document Delivery

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Overview of Trusts

In India, trusts are established as legal entities to manage assets for specific purposes, broadly classified as either public or private. Public trusts are set up for the benefit of the general public and often focus on charitable, educational, or religious activities. They are governed by various laws depending on the state, such as the Indian Trusts Act, 1882, and state-specific legislation like the Bombay Public Trust Act, 1950.

Private trusts, on the other hand, are created primarily for the benefit of specific individuals, typically family members. These are usually governed by the Indian Trusts Act, 1882, and are often used for estate planning, including through testamentary trusts which become effective after the death of the settlor. Both types of trusts are instrumental in structured asset management and fulfillment of philanthropic or familial objectives.

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In India, trusts are established as legal entities to manage assets for specific purposes, broadly classified as either public or private. Public trusts are set up for the benefit of the general public and often focus on charitable, educational, or religious activities. They are governed by various laws depending on the state, such as the Indian Trusts Act, 1882, and state-specific legislation like the Bombay Public Trust Act, 1950.

Private trusts, on the other hand, are created primarily for the benefit of specific individuals, typically family members. These are usually governed by the Indian Trusts Act, 1882, and are often used for estate planning, including through testamentary trusts which become effective after the death of the settlor. Both types of trusts are instrumental in structured asset management and fulfillment of philanthropic or familial objectives.

Advantages of Trust Registration

Benfits of Trust Registration

Asset Protection

Trusts legally protect assets from creditors and lawsuits, securing them for beneficiaries.

Tax Benefits

Registered trusts can avail of certain tax exemptions under the Income Tax Act.

Succession Planning

Trusts facilitate smooth transfer of assets to beneficiaries without the need for probate.

Confidentiality

Trust details remain private, unlike wills which become public through probate courts.

Flexibility

Trusts offer flexibility in managing and distributing assets according to the settlor’s instructions.

Charitable Purposes

They enable systematic charitable activities, potentially enhancing social impact and community benefits.

Minimum Requirements

Examples:

Charitable Trusts: Tata Trusts, which support health, education, and rural development initiatives.

Religious Trusts: Tirumala Tirupati Devasthanams, which manages the operations of the Tirumala Venkateswara Temple in Andhra Pradesh.

Examples:

Family Trusts: A trust established to provide for the educational expenses of the settlor’s children and grandchildren.

Testamentary Trusts: A trust specified in a will to manage and distribute assets to the settlor’s relatives after their death.

Minimum Requirements

As Per Indian Trust Act, there are Minimum Requirements that need to be met For Trust Registration in India.

Parties to the trust

Parties to the trust

Purpose or object of the trust

Purpose or object of the trust

Property of the trust

Property of the trust

Documents for formation of the trust

Documents for formation of the trust

Documents for Trust Registration

The following documents need to be scanned and attached for Trust Registration

Basic Legal and Identity Documents

Property and Compliance Documents

Basic Legal and Identity Documents

Trust Deed

Proof of Registered Office Address

Trust Deed

Proof of Identity of Settlor(s) and Trustees

Proof of Address of Settlor(s) and Trustees

Photographs of all Members

Proof of Identity of Settlor(s) and Trustees

Property Documents

Property and Compliance Documents

Proof of Registered Office Address

Property Documents

NOC from Landlord

Affidavit(if applicable)

Proof of Address of Settlor(s) and Trustees

NOC from Landlord

Photographs of all Members

Affidavit(if applicable)

Note: The registrar’s office may also ask for additional documents or details specific to the state or the nature of the trust.

Trust Registration Procedure

Where state-specific trust acts exist, they govern trust registration; otherwise, the Indian Trusts Act, 1882 applies.

Trust Registration Procedure mobile
Trust Registration Procedure

Define Name of Trust: Choose a legally permissible and unique name for the trust to avoid any confusion with existing entities.

Define Objects and Area of Work: Clearly outline the trust’s objectives and the geographical areas where it intends to operate, specifying the type of charitable work and beneficiaries.

Choose Trustees of the Trust: Select trustworthy and competent individuals who align with the trust’s mission to manage and oversee its operations.

Execute Trust Deed on Requisite Value of Stamp Paper: Draft the trust deed including all the details above, and execute it on stamp paper of the value mandated by the state where the trust is being registered.

Obtain Signatures of Settlor and All Trustees: Ensure that the settlor and all trustees sign the trust deed in the presence of a witness to validate their consent and understanding of the trust’s terms.

Affix Attested Photographs of All Trustees: Attach duly attested recent photographs of all trustees to the deed as part of the documentation requirements.

Register the Trust Deed with Registrar/Sub-Registrar: Submit the signed and completed trust deed to the local registrar or sub-registrar’s office. The choice of office depends on where the trust operates or holds property.

File Application for Registration of Trust: Lodge a formal registration application with the Assistant/Deputy Charity Commissioner along with all necessary documents and the prescribed fees.

Attend Hearing in Response to Inquiry: Attend a hearing where the Assistant/Deputy Commissioner will conduct inquiries about the trust to verify the information provided and assess the trust’s compliance with legal requirements.

Obtain Registration Certificate: After the hearing, if the trust is found compliant, a registration certificate will be issued, marking the trust’s formal recognition and enabling it to commence operations.

Note on Private Trust Registration in India: Registration of private trusts, especially those holding immovable property, is not mandatory under the Indian Trusts Act, 1882, but is advisable for legal clarity and to prevent disputes.

Registrations Required After Creation of a Trust

After establishing a trust in India, obtaining the following registrations is essential to ensure legal compliance and access to various benefits and funding opportunities

Section 12AB Registration: Provides income tax exemption on the trust’s income, improving financial efficiency and sustainability.

Section 80G Registration: Allows donors to claim tax deductions on their donations, encouraging greater contributions to the trust.

Purpose: Managed by NITI Aayog, this registration provides a unique ID to the trust, facilitating access to government schemes and fostering transparency and accountability. It is also often required when opening a bank account for the trust.

Purpose: Specifically for applying to central and state government grants. This registration ensures that trusts can access various government funding opportunities efficiently.

Purpose: Mandatory for receiving foreign contributions, this registration ensures proper utilization and accounting of foreign funds, thereby enhancing regulatory compliance and international funding opportunities.

Purpose: Necessary for undertaking Corporate Social Responsibility (CSR) activities on behalf of companies, allowing the trust to receive CSR funds from corporates, thereby contributing to community development and social initiatives.

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Section 12AB Registration: Provides income tax exemption on the trust’s income, improving financial efficiency and sustainability.

Section 80G Registration: Allows donors to claim tax deductions on their donations, encouraging greater contributions to the trust.

Purpose: Managed by NITI Aayog, this registration provides a unique ID to the trust, facilitating access to government schemes and fostering transparency and accountability. It is also often required when opening a bank account for the trust.

Purpose: Specifically for applying to central and state government grants. This registration ensures that trusts can access various government funding opportunities efficiently.

Purpose: Mandatory for receiving foreign contributions, this registration ensures proper utilization and accounting of foreign funds, thereby enhancing regulatory compliance and international funding opportunities.

Purpose: Necessary for undertaking Corporate Social Responsibility (CSR) activities on behalf of companies, allowing the trust to receive CSR funds from corporates, thereby contributing to community development and social initiatives.

Differences

comparison of Trusts, Societies, and Section 8 Companies in India

Frequently Asked Questions

What is a trust?

A trust is a legal arrangement in which a person (the settlor) transfers assets to a trustee to manage and hold for the benefit of beneficiaries.

What are the different types of trusts in India?

There are primarily two types of trusts: Public Trusts (created for the benefit of the general public) and Private Trusts (created for the benefit of specific individuals or groups).

What is a trust deed?

A trust deed is a legal document that outlines the terms and conditions of the trust, including the objectives, details of the trustees and beneficiaries, and the management of trust property.

Is it mandatory to register a trust?

Registration of private trusts is not mandatory unless they involve immovable property. However, public trusts, particularly charitable and religious trusts, usually require registration under state-specific legislation or the Indian Trusts Act, 1882.

What documents are required for trust registration?

Key documents include the trust deed, proof of identity and address of settlor(s) and trustees, property documents (if applicable), consent letters from trustees, recent passport-sized photographs of trustees and settlor(s), and an application for a PAN card for the trust.

Who can be a trustee?

Any individual competent to contract can be a trustee. This generally means they must be over 18 years of age and of sound mind. Additionally, bodies corporate can also act as trustees.

Can a trust be modified or revoked?

The ability to modify or revoke a trust depends on the terms specified in the trust deed. Generally, irrevocable trusts cannot be altered or revoked unless specific provisions are made within the trust deed.

What is the role of a trustee?

Trustees are responsible for managing the trust property in accordance with the terms of the trust deed and for the benefit of the beneficiaries. This includes maintaining records, managing assets, and ensuring compliance with legal obligations.

What are the tax benefits of a charitable trust?

Charitable trusts can avail tax exemptions under various sections of the Income Tax Act, such as Section 80G, which provides deductions for donations made to the trust.

How long does it take to register a trust?

The time required to register a trust can vary depending on the jurisdiction and completeness of the documentation. Generally, it can take anywhere from a few weeks to a few months.

Can a foreigner set up a trust in India?

Yes, foreigners can set up trusts in India, subject to compliance with Indian laws and regulations, including the Foreign Exchange Management Act (FEMA) if applicable.

What is the difference between a trust and a society?

A trust is managed by trustees and is governed by a trust deed, whereas a society is managed by a governing body and is registered under the Societies Registration Act, 1860. Societies often require a more democratic process for decision-making.