TRUST REGISTRATION IN INDIA

TRUST REGISTRATION IN INDIA

It's an arrangement that is created by one person & transferred to another person in order to provide the benefit to third Person.


Overview

In a trust, a certain kind of relationship is formed between the parties involved in it i.e. Trustor, Trustee and the Beneficiary. Trust is a non-profit organization. It is formed for the purpose of providing benefit to society, education, healthcare, religious, and any other general public welfare activity.

In this arrangement, the parties involved in it create a deed, known as Trust deed. In the trust deed, the details related to the nature of trust, parties involved, work to be done etc. are mentioned.

It is required to register the trust, so that trust gets a legal identity in the eye of Law. Trust is registered under the Indian Trust Act, 1882. 
 

What is Trust?

According to the Indian Trust Act, 1882, a trust is an organization where the Trustor (owner) takes a decision to transfer the right of his property to another person known as trustee in order to provide the benefit out of it to the third person known as the beneficiary. 

A particular property that is being transferred from the trustor to the trustee to provide a benefit to the beneficiary is known as Trust. There is a special relationship that exists between the trustor and trustee for the benefit of the beneficiary.
 

Parties Involved in  Trust

There are mainly three parties that are involved in trust and they are Trustor, Trustee, and Beneficiary.

  1. Trustor – A person who creates the trust is called as Trustor. They are the owner of the trust.
     
  2. Trustee – A person who holds the property of the trust given by the trustor, is known as Trustee.
     
  3. Beneficiary – The person for whom the trust is created, is called as Beneficiary. A beneficiary can be a known party of Trustor and Trustee.
     


 

Types of Trust

There are basically two types of trust and they are-

Public Trust – A trust which is created to provide a benefit to the general public at large, is known as Public Trust. Here the general public is the beneficiary for whom the trust is being created. The Public Trust is further subdivided in two parts and they are:

i.  Public Charitable Trust and

ii.  Public Religious Trust.
 

Private Trust – In the private trust, families or individuals are the beneficiary. A private trust is formed from a close group of people. This trust is also further subdivided into two parts:

i.  In case where both the beneficiaries and their required shares can be easily determined.

ii.  A Private Trusts where both or either the beneficiaries and their required shares cannot be easily  determined
 

Importance of Trust Registration

The main purpose to form a trust is to promote the non-commercial activities. These non-commercial activities that require promotion are arts, science, education, religion, environment and other general public welfare activities. It is important to register the trust so  that funding can be received and the amount of funding can be used in the promotion of the  above mentioned activities.

One gets certain benefit, if they register their trust. The benefits are as follows

  • One can avail the income tax benefits under section 12A and section 80G, if trust is registered.
  • To make sure that the activity conducted on behalf of the trust is working properly.
  • Trust should always try to promote such activities that create a better society.
  • Trust registration ensures that the business of the trust is governed by the Law.
  • To provide benefit to the maximum sectors of the society.
     

Eligibility Criteria for Trust Registration

One should check before going for trust registration whether they fulfill the following criteria or not and the eligibility criteria are-

  • To form the  trust, two or more than two persons are required.
  • Trust should be formed as per the provisions of the Indian Trust Act, 1882.
  • The parties that are involved in the formation of the trust should not be disqualified under any law that exists in India.
  • The purpose of creating the trust should be clear and valid.
  • If the trust is formed, with two purposes, then both the purposes should be valid. In case one is valid and the other one is invalid, then the trust cannot be formed.
  • Trust deed should be carefully drafted and should disclose the real intent of the parties forming the trust.
     

Documents Required for Trust Registration

  • Identity Proof – A copy of the identity proof of the trustor and the trustee. The identity proof should be self attested. PAN card, Aadhar Card, Driving License, Voter Id, Passport can be the identity proof.
     
  • Address Proof – Address proof of the registered office is required. Property registration certificate and utility bill such as electricity bill, telephone bill, etc are the address proof documents.
     
  • Trust Deed- A certified original copy of the Trust Deed with respective stamp value is required. A certain percentage of property’s total value will be the value of the stamp paper.
     
  • No-Objection Certificate – If the property is rented, then a No Objection Certificate (NOC) will be required from the Landlord.
     
  • Photograph – A passport size photograph of all the parties signing the trust deed will be required. The parties who will sign the trust deed are Trustor, Trustee and the witness.
     
  • Witness details- There should be atleast two witnesses who will sign the trust deed. The details of the witnesses will also be required.
     

Trust Deed

Trust deed is an important document that is required at the time of registration. The trust deed contains the following information:

  • Name of the Trust
  • Objective of the trust
  • Registered office of the trust
  • What are the activities that are going to be carried out by the trust
  • All the personal information of the trustor and trustee such as Name, Age, Father’s Name, Address, Occupation, Mobile Number, Email Address, Designation.
  • The total number of trustees
  • The rules and regulations that the trust is going to follow
  • Quorum of the board
  • What are the duties and responsibilities of the Board of director, other members, manager etc.
  • Any other information of the trust.
     

Process of Trust Registration

  1. The first step is to select the name. The name should be unique. The name should not be identical to the already existing trust name.
     
  2. Then they are required to decide the settlers of the trust.
     
  3. Thereafter they have to form a Memorandum of Association (MOA) of the Trust. In the MOA, the objective of the trust is mentioned for which the trust is formed for.
     
  4. Then they are required to draft a trust deed. A trust deed is said to be the most important document for the trust registration. 
     
  5. After that, they are required to submit the trust deed to the registrar of the respective state. While submitting the trust deed, the applicant has to pay the prescribed fees to the registrar.
     
  6. Finally, if the registrar is satisfied after the proper verification of the documents, the trust will get registered. The applicant will receive a trust registration certificate from the registrar.
     
  7. Then after receiving the trust registration certificate, it is mandatory to open a bank account in the name of the trust. It is also mandatory to obtain PAN and TAN of the trust.
     

Who is the governing body of the Trust?

Registrar of Trust is the primary regulatory authority in case of trust registration. The registrar of trusts is required to maintain all the information related to trusts that have been registered in India. Registration of Private Trust is governed by the Trusts Act, 1882.
 

Public trust registration is not governed by any act. The public trust has to follow separate acts as per different states where they are registered. For example, if the trust is registered in Bombay, then that trust will come under the jurisdiction of the Bombay Public Trust Act. In India, the Public trusts are required to be registered with the respective state authority.
 

Some of the following laws that regulate trust are Indian Trust Act, 1882, Income Tax Act, 1961, Societies Registration Act, 1860 etc.
 

Frequently Asked Questions (FAQ’s)
 

Is it compulsory to register the trust?

Yes, it is compulsory to register the trust. They should be registered with the registrar of trust. Few trusts such as religious trust etc are not required to get registered but it is always in the best interest of the trust to get registered in order to avoid any future hurdles.
 

What is a trust?

According to the Indian Trust Act, 1882, a trust is an organization where the Trustor (owner) takes a decision to transfer the right of his property to another person known as trustee in order to provide the benefit out of it to the third person known as beneficiary. 

A particular property that is being transferred from the trustor to the trustee to provide a benefit to the beneficiary is known as Trust. There is a special relationship that exists between the trustor and trustee for the benefit of the beneficiary.
 

What are the parties involved in a trust?

There are mainly three parties that are involved in a trust and they are Trustor, Trustee and Beneficiary.
 

Who is known as Trustor?

 A person who creates the trust is called as Trustor. They are the owner of the trust.
 

Who is known as Trustee?

 A person who holds the property of the trust given by the trustor, is known as Trustee.
 

Who is Beneficiary?

The person for whom the trust is created, is called as Beneficiary. Beneficiary can be a known party of Trustor and Trustee.
 

How many types of trusts are there in India?

There are two type of trusts that exist in India and they are Public Trust and Private Trust.
 

What is a Private Trust?

In the private trust, families or individuals are the beneficiary. A private trust is formed from a close group of people. This trust is also further subdivided into two parts:

  1. In case where both the beneficiaries and their required shares can be easily determined.
  2. A Private Trusts where both or either the beneficiaries and their required shares cannot be easily determined.
     
What is Public Trust?

A trust which is created to provide a benefit to the general public at large is known as Public Trust. Here the general public is the beneficiary for whom the trust is being created. The Public Trust is further subdivided in two parts and they are:

  1. Public Charitable Trust and 
  2. Public Religious Trust.
     
What are the documents required for trust registration?

The documents that are required for trust registration are as follows:

  1. Identity Proof – A copy of the identity proof of the trustor and the trustee. The identity proof should be self attested. PAN card, Aadhar Card, Driving License, Voter Id, Passport can be the identity proof.
     
  2. Address Proof – Address proof of the registered office is required. Property registration certificate and utility bill such as electricity bill, telephone bill, etc are the address proof documents.
     
  3. Trust Deed- A certified original copy of the Trust Deed with respective stamp value is required. A certain percentage of property’s total value will be the value of the stamp paper.
     
  4. No-Objection Certificate – If the property is rented, then a No Objection Certificate (NOC) will be required from the Landlord.
     
  5. Photograph – A passport size photograph of all the parties signing the trust deed will be required. The parties who will sign the trust deed are Trustor, Trustee and the witness.
     
  6. Witness details- There should be atleast two witnesses who will sign the trust deed. The details of the witnesses will also be required.
     

Conclusion

One should be very clear before forming a trust, that how they are going to arrange for the funds as trust is a non-profit organization that works on the fundings.
 

Edited by Minu Mishra

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