Trust Registration

Trust Registration

Trusts are a business structure created with noble intentions to promote the development of sciences, literature, and other worthy causes. They serve purposes such as alleviating scarcity, providing education to those in need, and offering medical support. Trust registration is officially registering a trust under the Trusts Act of 1882. This legal step ensures that the trust is recognized and operates within the framework of the law. Trust registration provides legal validity and establishes its existence as a separate entity.

If you are contemplating the creation of a trust for non-profit or charitable purposes, registration of a trust is vital to ensure its effective operation and compliance with legal obligations. At Taxation Point India, we have a dedicated team of professionals ready to support you every step of the way during the trust registration and getting a trust registration certificate. We clear up your doubts and confusion on how to register a trust in India. Our aim is to provide you with a seamless and efficient trust registration process.

Contact us today to discuss your registration needs and benefit from our expertise in establishing legally compliant and effective trusts.

Trust & Trust Registration - An Overview

Individuals establish trusts to allocate a portion of their assets or property for the benefit of another person. A trust is a fiduciary relationship involving the trustor, trustee, and beneficiary. The involved parties are outlined in the trust deed when applying for registration for trust creation.

A trust is established when the trustor transfers a specific asset or property to the trustee for the ultimate benefit of the beneficiary. The beneficiary, who is typically a third party, may have a connection to both the trustor and the trustee.

Therefore, the relationship between the parties involved is essential in defining trust. According to the Indian Trusts Act of 1882, a trust is defined as a "Relationship between the trustor and trustee to hold specific benefits for the beneficiary."

Parties involved in the Trust Registration Process

The trust registration process involves the following parties:

Trustor:

The trustor is the person who establishes the trust. They are typically the owner of the assets or property being placed in the trust.

Trustee:

The trustee is an individual or entity entrusted with the responsibility of managing and overseeing the trust. They hold and administer the trust property on behalf of the trustor and for the benefit of the beneficiary.

Beneficiary:

The beneficiary is the person for whom the trust is created. They are the intended recipient of the benefits, assets, or property held within the trust. The beneficiary can be a third party, known to both the trustor and trustee, and they are entitled to receive the benefits according to the terms and conditions of the trust.

Types of Trusts

Trusts can be classified into various categories based on the activities they undertake. You need to understand these types to navigate how to register a trust in India. Here are the different types of trusts:

  • Public Trust
  • Private Trust
  • Public Cum-Private Trust
Private Limited Trusts

Private Limited Trusts are established to carry out activities for specific individuals, families, or close associates. These trusts can have beneficiaries closely related to the trust'strust's founders. Private limited trusts are governed by The Trusts Act of 1882.

Public Limited Trusts

Public limited trusts are typically created to benefit the general public. They are often established for charitable, educational, and religious purposes and are governed by specific statutes such as the Religious Endowments Act of 1863, the Charitable and Religious Trust Act of 1920, or the Bombay Public Trust Act of 1950. Charitable and religious trusts are the most common types of public trusts in India.

Public Cum-Private Trust

This type of trust serves both public and private purposes. It can utilize its income for the benefit of the public and specific individuals or families. The beneficiaries of a public cum-private trust can be a combination of public and private individuals.

Regulatory Authority and Laws for Trust Registration

The Registrar of Trusts is the primary regulatory authority responsible for the registration of trust in India. Their role involves maintaining a comprehensive database of all registered trusts in the country. The registration process for private trusts is governed by the Trusts Act of 1882.

In the case of public trusts, no singular governing act applies uniformly. Public trusts in India must be registered with the relevant state authority as required by the applicable state act.

Several laws play a significant role in the regulation of trusts in India. These include:

  • Trusts Act of 1882: This act provides the legal framework for registering and administrating private trusts. It outlines the rights, responsibilities, and procedures associated with registration for private trust.
  • Income Tax Act of 1961: The Income Tax Act grants certain tax benefits and exemptions to registered trusts. Donors can take advantage of tax deductions under this act when making contributions to registered trusts.
  • Societies Registration Act of 1860: Although it does not directly govern registration of trust establishment, this act regulates the trust formation and functioning of societies involved in charitable, literary, scientific, or artistic activities. Societies often work alongside trusts and may engage in similar endeavors.
Reasons for Trust Registration

Obtaining charitable trust registration for the is necessary for the following reasons:

  • It ensures proper regulation of trust activities, ensuring compliance with laws and regulations.
  • Trusts aim to promote non-commercial activities in areas like arts, science, education, and the environment, contributing to a better society.
  • Registered trusts can claim income tax benefits under sections 12A and 80G, encouraging donations and support.
  • Public trusts serve the general public, and registration ensures they act in the public’s best interests.
  • It provides a license to conduct trust-related businesses within the legal framework.
  • Trusts contribute to the development of sectors like education, healthcare, social welfare, and the environment.

By registering, trusts fulfill their objectives, gain legal recognition, and access government benefits and opportunities.

Benefits of Trust Registration

It offers several advantages to individuals and organizations. Here are the key benefits of charitable trust registration:

  • Charitable Involvement:Setting up a Charitable Trust allows individuals to benefit themselves, their beneficiaries, and their chosen charities.
  • Tax Exemptions: Registered trusts in India can access tax exemptions provided by the Income Tax Department, benefiting from tax relaxations.
  • Financial Support: Registered trusts provide essential financial assistance to the underprivileged and the public through charitable activities.
  • Legal Protection: The Indian Trusts Act of 1882 ensures comprehensive legal protection, safeguarding the trust's legal standing from unnecessary claims.
  • Family Wealth Protection: Trusts help allocate specific assets, preserving and managing family wealth that may be difficult to divide individually.
  • Probate Avoidance: It enables the transfer of assets to heirs without probate, streamlining the asset distribution process.
  • Immigration/Emigration Benefits: Establishing a trust can be advantageous when relocating, mitigating taxation, safeguarding assets, and offering flexibility in asset organization.

By registering a trust, individuals can enjoy these benefits, including financial advantages, legal protection, and asset management flexibility.

Registration Requirements for the Trust

To be eligible to obtain a trust registration certificate, the following criteria must be met:

  • A trust must be formed by at least two or more individuals.
  • The trust must be established in accordance with the provisions outlined in the Indian Trusts Act of 1882.
  • None of the parties involved should be disqualified under any prevailing law in India.
  • The objectives of the trust formation must not contravene any existing laws in India.
  • The trustee must conduct their activities in a fair and just manner.
  • The trust formation should not be contrary to public interest or any other applicable laws.
  • The activities carried out by the trust must not cause harm to any individual.
  • The trust activities should align with the objectives stated in the trust deed.
  • The trust deed must be drafted appropriately, reflecting the genuine interests of the parties involved in forming the trust.
  • The trust has more than two purposes, both purposes must be valid. If one goal is reasonable and the other is invalid, the trust cannot be formed.
Contents of a Trust Deed

A trust deed is a crucial document that outlines the key details and provisions of a trust. It encompasses the following clauses:

  • Period or term for which the trust will remain in operation.
  • The registered office address of the trust.
  • The geographical area or region where the trust will carry out its activities.
  • The goals and objectives that the trust aims to achieve.
  • Information about the person establishing the trust (settlor) and details of the assets or property being transferred to the trust.
  • Information about the board of trustees, including their membership, qualifications, terms, and tenure.
  • The roles, responsibilities, and powers of the trustees.
  • Procedures for amending the trust deed and provisions for the closure or termination of the trust.
  • The trust deed ensures that the trust operates in accordance with the relevant laws and regulations.

The trust deed serves as a legally binding document that governs the operations and functioning of the trust, providing clarity and guidance to all parties involved.

Documents required:

A trust deed is a crucial document that outlines the key details and provisions of a trust. It encompasses the following clauses:

  • Trust Deed with the respective stamp value.
  • Two photographs of the parties involved in the trust.
  • PAN cards of the individuals associated with the trust.
  • Address proof of the individuals.
  • Identity proof of the individuals.
  • Authentication from the partners (if applicable).
  • No Objection Certificate for using the premises (if applicable).
  • Any form of a utility bill as proof of address.
  • Address proof of the trust registered office.
  • 12A Registration and 80G Certificates from the respective income tax authorities to claim deductions (if applicable).
Process / Procedure for Applying for Trust Registration

The procedure to register for the Trust creation and obtaining a trust registration certificate is explained in detail below:

Name of the Trust

The parties forming the trust must choose an appropriate name that complies with the provisions of relevant acts such as Trademarks, Copyrights Act, Intellectual Property Rights Act, and Emblems and Names Act, 1950.

Settlers of the Trust

Determine the individuals who will act as settlers of the trust. While there is no restriction on the number of trustees, a minimum of two trustees is required. The author of the trust cannot be a trustee, and all trustees must be residents of India.

Prepare a Memorandum of Association for the Trust

Prepare a Memorandum of Association (MOA) that outlines the objectives and purpose for which the trust is being formed. Ensure that the goals stated in the MOA are legally permissible.

Draft the Trust Deed

Create a trust deed, which is a legally binding document that establishes the trust. The trust deed must be presented to the registrar when registering the trust. It should contain all the terms and conditions agreed upon by the author, trustees, and beneficiaries.

Submit the Deed to the Registrar

Once the trust deed is drafted, submit it to the registrar and other required documents. The author, trustees, and beneficiaries willbe involved in this process.

Obtain Trust Registration Certificate

After reviewing the submitted documents, the trust will be registered if the registrar is satisfied with their validity and compliance. The registrar will issue a trust registration certificate, which the trustees and the trustor should keep. Once the trust is registered, a bank account can be opened in the trust’s name.

Winding up a trust

Winding up a trust occurs when all the trust’ properties/assets are distributed lawfully to the beneficiaries or a similar entity, directly or through resettlement. During the winding-up process, the parties involved must address any tax obligations resulting from the asset transfer. It is essential to comply with the approval of the charity commissioner, court, or other applicable laws to minimize the risk of legal disputes.

How can Taxation Point India help in securing Trust Registration?

At Taxation Point India, our team of experts is committed to providing you with the necessary support for charitable trust registration and ensuring compliance. It involves intricate legal implications that require careful attention. Our experts will resolve your questions regarding how to register a trust in India. Our professionals ensure that you gain a deeper understanding of the governing provisions of Trust in India, enabling you to undertake Trust-related activities with minimal legal hassles.

Taxation Point India, we provide comprehensive business registration, compliance, and tax solutions tailored to the needs of businesses across India.

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