Easily register a trust in India

Trust Registration

Trusts are popular vehicles for managing assets and conducting charitable activities in India. To operate legally, a trust must be registered with the relevant authorities. Trust registration in India involves a few key steps and requires certain documents and information. In this guide, we will cover the process for trust registration in India, including the eligibility criteria, the documents required, and the steps involved.

If you intend to start an NGO in India, one of the options you have is to register a trust, widely known as charitable trust. A trust is registered under Indian Trusts Act, 1882. However, each state government authority has the liberty to formulate and regulate its own trust act to govern such NGO’s in its own state.

A trust is an arrangement where the owner (trustor/settler/founder/author) transfers the property to someone else (trustee) for the benefit of a third party (beneficiary). Beneficiaries could be a group of individuals or the general public.

Trusts are formed to help and support the deprived sections of society or transfer property to the beneficiary.

There are two types of trusts based on the type of beneficiary:

• Public Trust: A public trust is created for the benefit of the general public. A public trust can be further subdivided into public charitable trust and public religious trust.
• Private Trust: A private trust is created for the benefit of a particular group of individuals (mainly family or friends) known as the beneficiary.

Further, a private trust can be subdivided into two categories.

• Both the beneficiaries and their requisite shares can be determined.
• Private trust whose both or either the beneficiaries and their requisite shares cannot be determined.

Why register a trust?

• A public trust has to be registered with the office of the charity commissioner who has jurisdiction over the trust.
• If a trust intends to be involved in charitable activity or intends to transfer an immovable property in the name of a trust.
• A trust must be registered if the trust intends to acquire government projects or receive funds or for social causes.
• A trust must be registered to avail tax benefits.
• Trust must be registered in order to gain credibility, especially when it involves public money or donations.

What is the process involved in trust registration?

The following are the steps involved in getting trust registration:

• Selection of Trust Name: The first step to registering a trust starts with selecting a unique name for your trust. The name must not violate or infringe on someone else’s name or any registered trademark.
• Trust deed: The next step is to draft a trust deed. While drafting a deed, the following items must be included:
  • Trust Name.
  • Registered office address.
  • Area of operations.
  • Main object.
  • Author details.
  • Assets details.
  • Beneficiary details
  • Trustee details along with power and functions of managing trustees and other trustees.
  • Board members with their qualifications, terms, and tenure.
  • Closure and amendment of the trust deed and the other applicability of the act

Once the draft is ready, the trust deed needs to be executed on appropriate non-judicial stamp paper, and the rate of stamp duty differs from state to state.

• Application filling: Next step is to file an application before the sub- registrar office having jurisdiction based on the registered office of the trust and pay the applicable govt.fee.
• Seeking appointment: Upon application submission, the sub-registrar office schedules the date and time for an appointment, on this date the trust deed is presented before the sub-registrar where all trustees and settlers need to be present along with two witnesses.
• Trust Registration: The registration process is then undertaken by the office of the sub-registrar, and the original registered trust deed can be collected after a week’s time.
• Opening of bank account: The next logical step is to get the GST(if applicable), allotment of PAN and TAN and thereafter open a bank a/c for the trust.

Tax Applicability

There is a general misconception that trust need not have to pay tax as they work for the public welfare or social cause. But this is not true. Like any other legal entity, a trust is also liable to pay tax.

In order to get tax exemption, a trust can acquire a 12A certificate from the Income Tax Department. Upon acquiring 12A certificate a trust is exempted to pay income tax for the entire lifetime on its surplus income.

Whereas 80G Certificate allows donors( an individual or an entity) making donations to an 80G certified trust, to avail deduction. Thus, such a deduction is given to the donors under section 80G of the Income Tax Act.