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Trust Registration
Trusts serve as widely used means for administering assets and executing charitable endeavors in India. Legal operation of a Trust necessitates registration with pertinent authorities. Trust registration in India encompasses several essential steps and necessitates specific documents and information. This guide outlines the process for Trust registration in India, detailing eligibility criteria, required documentation, and procedural steps.
When considering establishing an NGO in India, registering a Trust , commonly referred to as a charitable Trust , is among the available options. A Trust is incorporated under the Indian Trusts Act of 1882. However, each state government has the discretion to devise and enforce its own Trust act to govern such NGOs within its jurisdiction.
A Trust is a setup wherein the individual (Trust or/settler/founder/author) relinquishes ownership of property to another person (Trust ee) for the advantage of a third party (beneficiary). Beneficiaries may comprise either a collective of individuals or the broader public.
Trusts are established to aid and assist disadvantaged segments of society or convey property to the beneficiary.
There are two types of Trust s based on the type of beneficiary:
- Public Trust : A Public Trust is established to benefit the broader public. It can be categorized into public charitable Trust s and public religious Trust s.
- Private Trust : A Private Trust is formed to benefit a specific group of individuals (primarily family or friends), referred to as the beneficiaries.
Further, a private Trust can be subdivided into two categories.
- Both the beneficiaries and their respective shares can be identified.
- In a {Private Trust , either or both the beneficiaries and their corresponding shares cannot be identified.
Why Register A Trust ?
- A public Trust is required to undergo registration with the charity commissioner’s office overseeing its jurisdiction.
- Registration is necessary for a Trust planning to engage in charitable activities or transfer immovable property to the Trust ‘s name.
- If a Trust aims to participate in government projects, receive funding, or support social causes, registration is obligatory.
- Registration is essential for a Trust to access tax benefits.
- Registering a Trust is crucial for establishing credibility, particularly when managing public funds or donations.
What Are The Processes Involved In Trust Registration?
The following are the steps involved in getting Trust registration:
- Selection of Trust Name: The initial stage of Trust registration involves choosing an exclusive name for the Trust . The chosen name should not infringe upon any existing name or registered trademark.
- Trust Deed: Subsequently, the process entails drafting a Trust deed. The Trust deed should encompass the following elements:
- Trust Name.
- Official address of registration.
- Operational jurisdiction.
- Primary purpose.
- Information about the author.
- Details of assets.
- Information about beneficiaries.
- Details of Trustees including their roles and responsibilities.
- Board members including qualifications, terms, and duration.
- Procedures for amending or terminating the Trust deed and other provisions of the act.
After finalizing the draft, the Trust deed must be executed on the relevant non-judicial stamp paper, with the stamp duty rate varying across states.
- Application Filing: The subsequent step involves submitting an application to the sub-registrar office that holds jurisdiction corresponding to the Trust ‘s registered office, along with payment of the relevant government fee.
- Appointment Scheduling: Following the application submission, the sub-registrar office arranges a date and time for an appointment. On this scheduled date, the Trust deed is presented before the sub-registrar, with all Trustees and settlers required to be present along with two witnesses.
- Trust Registration: The registration process is conducted by the sub-registrar’s office, and the original registered Trust deed can be obtained after a week’s time.
- Opening Bank Account: The subsequent logical step is to obtain GST (if applicable), allocation of PAN and TAN, and subsequently open a bank account for the Trust .
Tax Applicability
There is a common misunderstanding that Trusts are exempt from taxation because they operate for the public welfare or social causes. However, this is incorrect. Similar to any other legal entity, Trusts are also obligated to pay taxes.
To qualify for tax exemption, a Trust can obtain a 12A certificate from the Income Tax Department. Once the Trust acquires a 12A certificate, it is relieved from paying income tax on its surplus income for its entire existence.
On the other hand, an 80G Certificate permits individuals or entities donating to an 80G-certified Trust to claim deductions. Therefore, donors are eligible for this deduction under section 80G of the Income Tax Act.
Following Documents Are Required For Trust Registration:
- Trust Deed
- Self-attested copies of identity and address proof of the settler (such as PAN card, Aadhar card, passport, voter ID, driving license, or any other photo ID)
- Self-attested copies of identity and address proof of each Trustee (such as PAN card, Aadhar card, passport, voter ID, driving license, or any other photo ID)
- Proof of address for the registered office of the Trust (such as electricity/water bill, property tax receipt, or registration certificate)
- No objection letter signed by the owner of the office premises.
FAQs -Trust Registration
A Trust organization is a legal entity formed for charitable, religious, educational, or other benevolent purposes. It operates under a Trust deed that outlines its objectives, governance structure, and operational guidelines.
To register a Trust organization, you need a minimum of two Trustees who will act as the governing body of the Trust. Additionally, you must draft a Trust deed that clearly defines the objectives, activities, and rules governing the Trust ‘s operations.
The process involves drafting a Trust deed, obtaining signatures from all Trustees, and submitting the Trust deed along with the required documents to the local registrar or sub-registrar office. Upon verification and approval, the registrar issues a certificate of registration for the Trust
Some advantages include legal recognition and legitimacy, tax exemptions on income generated for charitable purposes, eligibility for government grants and funding, and enhanced credibility and Trust among donors and stakeholders.
While the primary purpose of a Trust organization is charitable or benevolent, it can engage in certain commercial activities as long as the profits generated are utilized for furthering its charitable objectives and not distributed among its Trustees or members.
Yes, after registration, a Trust organization must comply with various statutory requirements, including maintaining proper books of accounts, conducting annual general meetings, filing annual returns with the relevant authorities, and adhering to the regulations specified by the Trusts Act or other relevant laws.
Yes, a Trust organization can be dissolved voluntarily by its Trustees if it is no longer able to fulfill its objectives or if there is unanimous agreement among the Trustees to dissolve it. Similarly, the Trust deed can be amended with the consent of all Trustees and in compliance with legal requirements.
Yes, foreign nationals or entities can establish a Trust organization in India, subject to compliance with applicable laws, regulations, and restrictions imposed by the government on foreign contributions and activities of non-profit organizations.
No, a non-profit company cannot be converted into a for-profit company. However, it can be dissolved or merged with another non-profit organization with similar objectives.
The time taken for registration depends on various factors, including the accuracy and completeness of the submitted documents, the workload of the registrar’s office, and any additional requirements specific to the case. Generally, the registration process takes around 1 to 3 months from the date of submission of documents.