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Trust Registration

To obtain the benefits of a Trust, it needs to meet certain prerequisites, and the registration process is one of the prerequisites. Are you planning to register the trust? Contact us and get the Trust registration done. We will assist you from the advisory till guidance on compliance related to trust registration.

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Overview of Trust Registration

Trust registration is a completely online process that can be created by the execution of the Trust deed. The very first requirement in the Trust registration is the Trust deed. Before, knowing the detailed process of Trust Registration it is important to know what Trust is.

What is Trust in Indian Context?

A Trust is registered under The Indian Trust Act 1882 and provides for the provision related to Trust. The trust is a harmonization where the owner of the Trust transfers the property to a trustee. Here, the objective of transferring the property is to provide the benefit to a third party. The property is transferred to the trustee by the trustor along with a proclamation that the property should be held by the trustee for the beneficiaries of the trust.

To obtain the benefits of a Trust, it needs to meet certain prerequisites and the registration process is one of the prerequisites. Before registration, Trust Deed must be formed on the non-judicial stamp paper. Every state has fixed its rate on stamp duty.

Trust Registration

What are the Benefits of Trust Registration?

The benefits of Trust Registration are mentioned below:-

What are the Benefits of Trust Registration?
  • To Involve in Charitable Activities

    Charitable trusts are set up with the common objective of getting involved in charitable activities while collecting certain benefits for him, his heirs, and successors.

  • Registered Trust Avails Tax Exemptions

    The other main reason for setting up the registered Trust is to avail tax exemptions. Such charitable trusts are nonprofit organizations and to avail all these perquisites, the charitable trust should have a legal entity.

  • Provides Benefits to Poor People

    The registered trust provides the advantage to the poor people and the public by exercising the charitable activities fairly.

  • Compliance with Law

    By registering the trust, compliance would be maintained under the provisions of the Indian Trusts Act, 1882, which will directly keep the Trust safe from any legal hindrance.

  • Preservation of Family Wealth

    Trusts may be utilized to own specific assets, such as land/an interest in a family based company, which would not be suitable or practical for a settlor to split between individuals. The usage of a trust allows such individuals to benefit from the assets despite the fact that they do not own them. A trust will also assist to preserve the capital value of such assets for potential generations.

  • Avoid Probate Court

    As legal title of the assets surpasses from the settlor to the Trustee when they are “settled”, there is consequently no change of ownership when the settlor get dies, thus evading the need for probate of a will in terms of trust assets.

    Moreover, Grants of probate is a matter of public record, while a trust is a private agreement which does not have to be registered anyplace. The use of a trust can also avoid the economic adversity sometimes undergone by a surviving spouse even as waiting for probate to be granted.

  • Immigration/Emigration of Family

    When a person and her/his family shift to another country, it is frequently an ideal/only time to set up a trust in order to evade taxation in the destination nation, thereby protecting the family wealth & providing flexibility in its organization. Such organization requires detailed professional advice and guidance.

  • Forced Heirship

    The Residents of countries with fixed laws of legacy may be able to utilize trusts to get the flexibility they offer in respect of distribution of part/all of their assets to beneficiaries who could otherwise not be permitted to benefit under the laws of their country of the residence. Such planning must be made under a detailed professional guidance from legal experts in their nation of residence/nationality.

  • Tax Mitigation

    Trusts can be very effective in reducing taxation on capital and income. The trust may provide effective protection for the settlor, the beneficiaries and the trust assets from punitive taxation. A frequent use for trusts is the mitigation or avoidance of inheritance tax in the settlor’s jurisdiction although this will, naturally, be subject to appropriate tax advice being obtained.

  • Managing Assets

    Trusts can be very effective in reducing taxation on capital and income. The trust may provide effective protection for the settlor, the beneficiaries and the trust assets from punitive taxation.

What are the Parties Involved in the Trust Registration Process?

Below mentioned parties are involved in the Trust Registration Process-

  • Trustor
  • Trustee
  • Beneficiary

What are the Types of Trusts?

There are two types of trusts in India: private trusts and public trusts. While private trusts are governed by the Indian trusts Act, 1882, public trusts are divided into charitable and religious trusts. The Charitable and Religious Trust Act, 1920, the Religious Endowments Act, 1863, the Charitable Endowments Act, 1890, the Bombay Public Trust Act, 1950 are some of the statutes for the enforcement of public trusts in India.

Private Trust

A Private trust is a trust that is constituted for the benefit of 1 or more individuals who are, or within a given time may be, definitely ascertained. Private Trusts are regulated by the Indian Trusts Act 1882. These trusts may be created inter vivos or by will.

Public Trust

A Public Trust is a trust which is established wholly for the benefit of Public at large. Key points for Public Trusts are given bellow:-

  • Public trusts are basically charitable or religious trusts and are regulated by the general Law.
  • The regulations of Indian Trusts Act do not apply on Public Trusts.
  • Similar as the private trusts, public trusts may be established inter vivos or by will.

Public-cum-Private Trusts

The trusts whose part of the income may be utilized for public purposes and a part may go to a private person or persons are known as Public-cum-Private Trusts.

Classification in terms of Motive of Formation

Recently, trusts can also be used as a vehicle for investments, such as mutual funds and venture capital funds. These trusts are governed by Securities and Exchange Board of India (SEBI). Classification in terms of motive of formation is as follows:-

  • Private Trust

    Settlor creates a Trust primarily for benefit of one or more particular individuals as its Beneficiary.

  • Public Trust

    Beneficiaries are the general public or a class as a whole. It has some charitable end as its Beneficiary.

  • Simple Trust

    Trustee is just a passive depository of the Trust property. There are no active duties expected from Trustee and no directions are given to him.

  • Special Trust

    Trustee is active and acts as an agent to execute the Grantor’s wishes. This Trust is operative.

  • Express Trust

    Here, the Settlor creates a Trust over his assets either in present or upon his death. It can be either by way of a will or Trust deed.

  • Implied Trust

    It is created where some legal requirements for an Express Trust are not met, but intention on behalf of the parties is to create a Trust that is presumed to exist.

  • Others depending on the type of object(s).

What Documents are Required for Trust Registration?

Below-mentioned documents are required for Trust Registration-

  • Proof of Identity for Trustor & Trustee-Aadhaar Card, Voter ID, Passport, Driving License
  • Address Proof of Registered Office- Copy of Certificate of Property/Utility Bills (Telephone, Water, Electricity Bill)
  • In the case of rented property, NOC from the Landlord is required.
  • Objective of the Trust Deed.
  • Particulars of the Trustee and settlor (Self-attested copy Id and Address Proof along with the information related to occupation).
  • Trust Deed on Proper Stamp Value.
  • Photographs of Trustee and settlor.
  • PAN Card of Trustee and settlor.

In addition to that, the Trust deed contains the following information:-

  • Total number of trustees.
  • The Registered address of the trust.
  • Proposed name of the trust.
  • Rules and regulations to be strictly followed by the Trust.
  • Presence of settlor and 2 witnesses at the time of registration of Trust.

What is the Procedure for Trust Registration?

The procedure for Trust registration involves the below-mentioned steps-

What is the Procedure for Trust Registration?
  • Select an Appropriate Name

    The very first step while registering the Trust is to select an appropriate name for the trust. An applicant must take into consideration that the name so suggested should not come under the restricted list of names as per the provisions of the Emblems and Names Act, 1950.

  • Drafting of Trust Deed

    For Trust registration, the Trust deed should be drafted. A trust deed is a document that contains all the important information related to the registration and the deed must be present before the Registrar at the time of registration.

  • Selecting Settlers and Trustees of Trust

    The next step is to select the settlor and Trustees of the Trust. However, there is no specific provision with regards to the number of settlers/authors. Further, there must be a minimum of two trustees to form a Trust.

  • Preparing Memorandum of Association

    For Trust registration it is important to formulate the Memorandum of Association as it represents the charter of the Trust.

  • Paying the Requisite Fees

    The next step is to pay a requisite fee for Trust registration.

  • Collection of a Copy of Trust Deed

    Once an applicant submits the papers, he/she can collect a certified copy of the Trust Deed within 1 week from the registrar’s office.

  • Submission of Trust Deed to Registrar

    After obtaining a certified copy of the Trust Deed, submit the same with the local registrar. The Trust deed shall be submitted along with properly attested photocopies.

  • Obtain Registration Certificate

    After submitting the Trust Deed with the registrar, the registrar keeps the photocopy and returns the original registered copy of the Trust Deed to the applicant, and also issues the certificate within seven working days.

What Penalties can get Imposed on Breaches in Compliances of Trust Registration?

  • Civil and Criminal Penalties

    In case of Breach of trust, both civil and criminal penalties may be imposed on the Beneficiary. The Sections 405 to Section 409 of the Indian Penal Code 1860 deals with the specific provisions concerning criminal breach of trust.

  • Application for Tax Deduction Account Number

    The Trust or Institution should make an application for allotment of tax deduction account number to the Assessing Officer or the prescribed authority, in form number 49B of Income-Tax Rules immediately on registration of the trust or institution and quote the same on all the challans for payment of sums under section 200, on all the TDS certificates and all the returns delivered under section 206, 206A and 206B. A penalty of Rs. 10,000/- has been prescribed by section 272BB in case of failure to do so.

  • Failure to Furnish the Return of Income

    Failure to furnish the return of income attracts penalty under the Act. The return of income will not be considered as defective if the certificate for the tax deducted at source has not been furnished along with the return of income due to the default of the payer in not furnishing such certificate. The certificate is, however, required to be produced within two years from the end of the assessment year.

What is the Impact of Section 12AB on Trust Establishments?

To continue taking exemption under section 10 or 11 all the existing charitable trust or institutions are compulsorily required to get a fresh registration under Section 12AB which are already registered under the following section:-

  • Section 12A
  • Section 12AA
  • Section 10(23C)
  • Section 80G.

Additionally, the trust registered under section 10 (23C) or section 12AA shall renew their registration under section 12AB. Accordingly, Section 12AA which stipulates the registration process for the Trusts or Institutions will cease to exist and a new section 12AB will come into force with effect from the bellow mentioned period, whichever is earlier.

  • The date of grant of registration under section 12AB or,
  • The last date by which the application for registration and approval is required to be made.

Is it Mandatory to E-file the Return for a Trust?

A trust must file a return electronically-

  • With or
  • Without a Digital signature.
  • Under the Electronic Verification Code.

However, Trusts who are liable to get its accounts audited section 44ABshall furnish the return electronically.

CorpBiz Procedure for Trust Registration

Kindly utilize the steps given above to integrate legally and securely a Trust Registration and get the benefits in the form of better-quality of charitable business. Our CorpBiz experts will be at your disposal for assisting you with guidance concerning Trust Registration and its compliance for the smooth functioning of your NGO business in India. CorpBiz professionals will assist you in planning seamlessly at the least cost, confirming the successful conclusion of the process.

It is advisable that an attorney with “NGO experience” must be appointed to overwhelm many of the potential pitfalls that creep around within Trust Registration and to understand the requirement in detail. The elementary information would be mandatory from your end to start the process. The Attorney will begin working on your request once all the information is provided, and the payment is received.

Why CorpBiz?

CorpBiz is one of the platforms which coordinate to fulfill all your legal and financial requirements and connect you to consistent professionals. Yes, our clients are pleased with our legal service! Because of our focus on simplifying legal requirements, they have consistently regarded us highly and providing regular updates.

Our clients can also track at all times the progress on our platform. If you have any questions about the Trust Registration process, our experienced representatives are just a phone call away. CorpBiz will ensure that your communication with professionals is charming and seamless.

  • Purchase a Plan for Expert Assistance
  • Add Queries Regarding Trust Registration
  • Provide Documents to Corpbiz Expert
  • Prepare Application for Trust Registration + Complete all Admissibility Criteria for Preliminary Screening
  • Complete Procedural Actions
  • Trust Registration at your Door Step!

Frequently Asked Questions

Yes, a trust must get the registered under section 12AB of Income Tax Act, 1961 to claim an exemption under section 11.

In a strict legal sense, a trust is not a separate legal entity, unlike a company. A trust gets created when the settlor hands over any property to the trustee to be used and employed for the benefit of the beneficiary. This legal arrangement is codified vide a trust deed.

  • Settlor
  • Trustee, and
  • Beneficiaries
  • Private Trust
  • Public Trust

Trustor is the person who creates the trust, whereas the person who has the responsibility of managing the trust for the beneficiary is known as Trustee.

The Indian Trusts Act, 1882, is a governing law for a Trust in India.

By and large an public trust is made for setting up a school, universities, other instructive activities, clinic, mature age homes, halfway house, for advancement of kid wellbeing and their strengthening, government assistance of more fragile segment of society, and for satisfaction of Corporate Social Responsibilities (CSR) by organizations.

  • Proof of Identity for Trustor & Trustee
  • Address Proof of Registered Office
  • NOC from the Landlord is required
  • Particulars of the Trustee and settlor
  • Trust Deed on Proper Stamp Value.
  • Photographs & PAN of Trustee and settlor.
  • Select an Appropriate Name
  • Drafting of Trust Deed
  • Selecting Settlers and Trustees of Trust
  • Preparing Memorandum of Association
  • Paying the Requisite Fees
  • Collection of a Copy of Trust Deed
  • Submission of Trust Deed to Registrar
  • Obtain Registration Certificate

It is extremely difficult to amend a trust deed since a trust by its inherent nature is irrevocable. Therefore, it is important to provide the amendment clauses in the trust deed itself. However, if the amendment clauses provided in the trust deed are too wide, then the trust may not be treated as irrevocable.

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