Indian Trust Act 1882 defines the Trust as an organization where the owner (trustor) decides to transfer the right of his property to a second person called trustee so that the third person (beneficiary) can take the benefit out of it.
The primary reason behind creating any trust is to indulge in charitable activities. Additionally, there is scope to avail the benefit of tax exemption. So, 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. It is 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.
There is public trust and private trust.
Public trust is created to provide benefit to the public at large, thus beneficiaries in the case of public trust are the general public at large. Public Trust is further subdivided into two parts:
1. Public Charitable Trust
2. Public Religious Trust
1. Private Trusts whose recipients and their imperative offers both can be resolved
2. Private Trusts whose both or either the recipients and their imperative offers can't be resolved
A charitable purpose is one designed to benefit, ameliorate, or uplift mankind mentally, morally, or physically.
Income Tax Department issues 12A certificates to the trusts or NGOs. Any trust that has 12A certificate is not liable to pay Income tax for the entire lifetime on its surplus income.
Additionally, an NGO must acquire 80G certificate. This certification gives the donor a permission to avail the benefit of deduction at the time of making a donation. Thus, you can say deduction is offered to the donors under section 80G of the Income Tax Act.
Registration can be done either at the state level (i.e., in the office of the Registrar of Societies) or at the district level (in the office of the District Magistrate or the local office of the Registrar of Societies).
The following procedures are involved in the registration of a trust:
Selection Of Name
Select a unique name for your trust, the name should be new and must not lead to any infringement.
Drafting Of Deed
The trust deed should be drafted wherein the gatherings to the deed will be settlor (creator of the trust deed), the trustee and the recipient. Trust Deed is the primary most important document which you will require at the time of Trust Registration. Trust Deed contains the following information:
Motive of the Trust
Information of the Settler and trustees like Name, Age, Father’s Name, Address, Occupation, Mobile Number, Email Address, Designation
Total number of Trustees
Address of the registered office of the trust
Rules and regulations that the trust will follow
Proposed name of the Trust
A copy of identity proof of the settler and trustee
Passport size photograph of the settler and trustee
Presence of the Settler along with original identity proof and two witnesses at the time of registration. Some states have made presence of trustee mandatory as well.
Trust Registration
A trust deed is a document which contains all the crucial information related to registration and must present it before the registrar of the trusts having jurisdiction.
PAN, TAN And Bank Account
The final step in the process of registration is to apply for allocation of PAN number and TAN and afterwards apply for a bank account.
Stamp-duty
A deed of trust is regulated by Article 64 of schedule I to the Indian Stamp Act for the purpose of stamp-duty
Registration under Income-tax Act
Charitable or religious trusts, societies and companies claiming exemption under sections 11 and 12 of the Income-tax Act are required to obtain registration under section 12AA of the Act. Private/family trusts are neither allowed such exemption nor required to seek registration under the Income-tax Act.
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