A trust can be created by execution of a trust deed; there are two types of trust. A public trust (charitable trust) is created for the benefit of the general public whereas a private trust is created for the benefit of a particular group of individuals known as the beneficiary.
Benefits of Trust Registration
The reason behind creating any trust is to indulge in charitable activities and at the same time avail the benefit of tax exemption. These charitable trusts are also called non-profit organization.
A trust has to be a legal entity if it wants to avail all the benefits of the trust offered by the government. Trust Act and Federal laws makes it mandatory for such entities to get registered under Charitable Trust.
Trust Deed is necessary to register a charitable trust. Hence, charitable registration is also called trust deed.
The Federal and State Law Departments in the India give an assortment of assets to manage the charitable associations and the common people. This procedure hugely helps those donors who want to lend their assets to the trusts, making them trustees fully expecting receiving tax benefits.
At the time of charitable trust registration it is necessary that you are aware of some fundamental knowledge related to trust registration and the fees payable at the time of registration. Explicit laws like the Trust Act 1882 have been proclaimed, and application form has been endorsed to encourage the procedure of registration.
Trust Registration in India: Rules, Procedure and Documents
The non profit organizations in India can register either as:
- Trusts or
- Societies or
- Private Limited Company under section 8 of the Companies Act.
- These organizations work for companies at large and undertake public welfare activities with a charitable purpose. Such purposes may include social contribution in the form of education, medical help or undertaking activities of public utility that promote public welfare.
Thus, the most preferred way to run an NGO or a non – profit organization is to form a Public Charitable Trust.
A Trust can be a private or public Trust depending upon the class of people that receive benefits. Furthermore, the main intent of running a Trust is to transfer the property to the beneficiary.
What is a Trust?
As per the Indian Trust Act 1882, a Trust is an arrangement where the owner (trustor) transfers the property to someone else (trustee) for the benefit of a third person (beneficiary).
Such a property is transferred by the trustor to the trustee along with a proclamation that the trustee should hold the property for the beneficiaries of the Trust.
Thus, Trusts can be classified into two categories:
Public Trust
It is a trust whose beneficiaries include the public at large. Further, a Public Trust can be further subdivided into Public Charitable Trust and Public Religious Trust.
Private Trust
A private Trust is the one whose beneficiaries include families or individuals. Further, a Private Trust can be subdivided into:
- Private Trusts whose beneficiaries and their requisite shares both can be determined
- The Private Trusts whose both or either the beneficiaries and their requisite shares cannot be determined
12A and 80G Certificates
A Trust or an NGO can acquire 12A certificate from the Income Tax Department. Thus, a Trust acquiring such a certificate is exempted to pay income tax for the entire lifetime on its surplus income.
Also, an NGO must obtain 80G certificate. This certificate allows donors, that is persons or organizations making donations to an 80G certified NGO, to avail deduction. Thus, such a deduction is given to the donors under section 80G of the Income Tax Act.
Legislation Pertaining to Trust
A Trust is governed by Indian Trusts Act, 1882 across India. However, each state can formulate its own Trusts Act to govern such non – profit organizations in its own state.
Further, a Trust can receive funds and projects much like a Society. However, its quite challenging to get funds or projects immediately after a Trust gets registered.
Therefore, to obtain funds or acquire projects, a Trust needs to meet certain eligibility criteria. Such criteria may include relevant experience, performance of a Trust, its age and such other parameters.
Furthermore, a Public Charitable Trust has to be registered with the office of the charity commissioner who has jurisdiction over the Trust. Hence, following is the procedure for its registration.
Registration Process for Public Charitable Trust
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1
Choose an Appropriate Name for the Trust
This is the first step in registering the Trust. Additionally, the name so suggested should not come under the restricted list of names as per the provisions of the Emblems and Names Act, 1950.
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2
Decide the Settlers or Authors and Trustees of the Trust
There is no defined provision with regards to the number of settlers/authors. However, in most of the cases there is typically one author.
Further, there is no limit on the maximum number of trustees. But a minimum of two trustees are necessary to form a Trust. Also, the author generally cannot be the trustee. And he needs to be a resident of India.
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3
Formulate Memorandum of Association (MOA) and Trust Deed of your Trust
A Trust Deed is legal evidence of your Trust’s existence and it contains the rules and regulations of your Trust. This document also contains the bylaws regarding the changes, removal or addition of the Trustees.
Memorandum Of Association (MOA)on the other hand represents the charter of the Trust. It defines the relationship of the Trustor with the Trustees and specifies the objectives for which such a Trust is formed. Such a document should contain the names, addresses and occupations of all the members along with their signatures.
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4
Documents Required to be Submitted at the Time of Registration
- Trust Deed
- Self attested copy of the proof of identity of the settler (Aadhaar card, passport, voter ID, driving license or any such photo ID)
- Self attested copy of the proof of identity of each trustee (Aadhaar card, passport, voter ID, driving license or any such photo ID)
- PAN card
- Proof of the registered office address of the Trust (electricity/water bill or registration certificate)
- Non Objection letter signed by the landowner
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5
Prepare Trust Deed on a Stamp Paper
As a Trust, you need to prepare the Trust Deed on stamp paper. The value of this stamp paper is of a certain percentage of the total value of the Trust’s property. Further, this percentage varies from state to state.
In addition to this, you need to pay a fee of Rs. 1100. Out of this amount Rs. 100 is the registration fee and Rs. 1000 are the charges of keeping a copy of the Trust Deed with a sub – registrar.
Once you submit the papers, you can collect a certified copy of the Trust Deed within one week’s time from the registrar’s office.
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6
Submit the Trust Deed with The Registrar
After receiving a certified copy of the Trust Deed, submit the same along with properly attested photocopies with the local registrar.
Further, the settler must put his signatures on every page of the photocopy of the Trust Deed. Also, it is mandatory for the settlers as well as two other witnesses to be physically present along with their identity proof (original as well as self attested photocopy) at the time of registration. However, physical presence of Trustees is debatable.
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7
Obtain the Registration Certificate
After submitting the Trust Deed with the registrar, the registrar retains the photocopy and returns the original registered copy of the Trust Deed.
Then, after completing all the formalities registration certificate is issued within a minimum of seven working days.