Trust Registration
Trust involves the conveyance of an asset, such as cash, shares, or other valuable items, from the owner to another individual. Trusts can be categorized into two types: Private and Public. A private trust is established for the advantage of a specific group of individuals, whereas a public trust is created for the benefit of the wider community.
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Why register a trust?
According to the Public Trust Act applicable in all states, it is compulsory to register a trust when it serves a charitable purpose or when there is a transfer of immovable property to the trust’s name.
A trust that is duly registered qualifies for the tax exemptions outlined in Section 12 A and 80G of the Income Tax Act.
The registration of a trust enhances its credibility, particularly as it pertains to the management of public funds received through donations.
Establishment of the Trust Agreement
- Author/Founder/Settlor of the trust
- Managing trustee(s)
- Other trustees
The maximum number of members constituting a quorum for the Board of Trustees shall not exceed 21.
Trust Compliances
Following its registration, a trust shall undertake the subsequent actions.
- Obtain PAN card
- Book Keeping and Accounts
- Annual IT filings
- Shops and Establishment License – in case of employment
- Professional Tax Registration- if applicable
- GST Registration- if applicable
Relevance of tax exemption eligibility.
It is commonly believed that trusts are exempt from taxation due to their contributions to public welfare. However, this belief is incorrect. A trust, similar to any other legal entity, is obligated to pay taxes. To qualify for tax exemptions, a trust must secure the necessary certifications, such as those under Section 12A and Section 80G, from the Income Tax authorities.
Trust registration in India – An overview
Establishing a non-governmental organization (NGO) is most effectively achieved through the formation of a Public Trust. This type of trust is dedicated to addressing issues such as poverty alleviation, educational support for disadvantaged groups, and the provision of medical assistance, alongside its broader mission of fostering the arts, sciences, and literature. It is important to understand that trusts are irrevocable, meaning they cannot be altered or dissolved without court approval. Vakilsearch offers assistance in obtaining the trust registration certificate, requiring only a few documents, including a deed of trust and a rental agreement.
In India, there are no overarching laws that regulate public trusts; however, certain states, such as Maharashtra and Tamil Nadu, have enacted their own public trust legislation.
Online Trust registration – A detailed process
Vakilsearch facilitates the online registration of trusts through a straightforward process. The first step in this registration involves the trust’s founder, referred to as the “Author of the Trust” or the “Settlor of the Trust,” drafting a document that outlines the trust’s objectives and the responsibilities of the trustees in fulfilling these goals. This document, which encompasses all relevant information, is known as a Trust Deed, also referred to as a deed of trust.
Following the completion of this process, an application for the registration of the trust must be submitted to the Registrar of Trust, accompanied by the Trust Deed or a deed of trust. Typically, the suitable jurisdiction for registering the trust is the location of its registered office..
Content of the Trust Deed
The trust deed serves as the fundamental and most critical document of the trust, outlining the rationale for its establishment, its operational functions, and the procedures governing its management until its dissolution. The following are key clauses included in the Trust Deed:
- Name of the trust
- The registered office of the trust
- Area of operation of the trust
- Objectives of the trust
- Details of the Author of the Trust
- Corpus/Assets of the Trust
- Details of the Board of Trustees
- A quorum of the Board with their qualification, terms and tenure
- Powers and functions of the Managing Trustee and other Trustees
- Closure and amendment of the trust deed and the applicability of the Act
Documents Required
In order to obtain your trust registration certificate, it is necessary to present the following documents at the time of Trust registration:
- A completely drafted trust deed
- Proof of registered office – (Rental Agreement or ownership document)
- ID proof of the Founder of the Trust
- Two witnesses
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