What is a Trust?
A Trust is an arrangement where owner or trust or of Trust transfers the property to a trustee. Such transfer of property is done for the benefit of a third party. The property is transferred to the trustee by the trust or along with a proclamation that the property should be held by the trustee for the beneficiaries of the trust.
The Indian Trust Act 1882, provides for the provisions related to Trust in India. The Trust Registration is advisable in India for obtaining the benefits.
What are the advantages of Trust Registration ?
The advantages of registering a trust are as follows:
- To Involve In Charitable Activities
- Registered Trust Avails Tax Exemptions
- Provides benefits To unprivileged People
- Compliance With Law
- Preservation Of Family Wealth
- Avoid Court
- Immigration/Emigration Of Family
- Forced Heirship
- Tax Mitigation
- Managing Assets
What are the Parties Involved in the Trust Registration Process?
The parties involved in the Trust registration process are as follows:
- Trustor
- Trustee
- Beneficiary
What are the Types of Trusts?
In India, there are two types of trust which are as follows:
- Private Trust: A Private trust is a trust that is created for the benefit of 1 or more individuals who are, or within a given time may be, definitely ascertained. In other words Private Trusts are constituted for the benefit of individuals rather than for the benefit of public. Private Trusts are governed under the Indian Trusts Act 1882 and may be created inter vivos or by will.
- Public Trust: A Public Trust is a trust which is constituted wholly for the benefit of Public at large. The major provisions under Public Trusts are as follows: –
- Public trusts are basically divided under charitable or religious trusts and are regulated by the general Law.
- The regulations of Indian Trusts Act which is applicable on private trusts, do not apply to Public Trusts.
- Like private trusts, public trusts may also be established inter vivos or by will.
- 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 Acts for the enforcement of public trusts in India.
- Public-Cum-Private Trusts: Those trusts whose income may be used for public purposes as well as 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).
Documents required for Trust Registration in Jaipur
The documents needed for registering a trust are mentioned below:
- 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, No Objection Certificate from the owner is needed.
- Objective of the Trust Deed.
- Particulars of the Trustee and settlor (Self-attested copy Id and Address Proof along with the data associated with occupation).
- Trust Deed on correct Stamp Value.
- Photographs of Trustee and settlor.
- PAN Card of Trustee and settlor.
What is included in deed of trust?
The Trust deed involves the following information: -
- Total number of trustees.
- The Registered address of the trust.
- Proposed name of the trust.
- Rules and laws to be strictly followed by the Trust.
- Presence of settlor and two witnesses at the time of registration of Trust.
What are the steps involved in Trust Registration?
The procedure of the Trust Registration in India is as follows:
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1
Choose an Appropriate Name
This is the first step in the procedure of Trust Registration in India. Additionally, the name so suggested by the applicant should not come under the restricted list of the names as per the provisions of the Emblems and Names Act, 1950
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2
Decide the Authors and Trustees
There is no specifically defined provision with regards to the number of settlers or authors. However, in most of the cases, there is generally only one author of a Trust. Furthermore, there is no limit on the maximum number of the trustees of a Trust. But a minimum number of two trustees are necessary to form a Trust in India. Also, generally, the author cannot be the trustee of a Trust. And the author is required to be a resident of India. Also, know the complete checklist of trust registration in India.
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3
Formulate Memorandum of Association and Trust Deed
A Trust Deed is legal evidence of the existence of the Trust. It contains the rules and regulations of the Trust. This document also contains the laws regarding the removal, changes, or addition of the Trustees to the Trust.On the other hand, Memorandum of Association or MOA represents the charter of the Trust. It defines the relationship between the Trust or and the Trustees and also specifies the primary objectives for which such a Trust is formed by the applicants. Such a document of a Trust should contain the addresses, names, and occupations of all the members along with their signatures.
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4
Preparation of Trust Deed on a Stamp Paper
As a Trust, the applicant is required to prepare the Trust Deed on a stamp paper. The value of the stamp paper is of a certain percentage of the total value of the property of the Trust. Furthermore, this percentage value of the Trust varies from state to state. In addition to this, the applicant is required to pay a fee of Rs. 1100. Out of this Rs. 1100 amount of Rs. 100 is the Trust Registration fee and other Rs. 1000 are the charges of keeping a certified copy of the Trust Deed with the Sub-Registrar.
Once the applicant submits all the required papers, he/she can collect a certified copy of the Trust Deed. Such a copy can be collected within a time period of one week from the office of the Registrar.
As a Trust, the applicant is required to prepare the Trust Deed on a stamp paper. The value of the stamp paper is of a certain percentage of the total value of the property of the Trust. Furthermore, this percentage value of the Trust varies from state to state. In addition to this, the applicant is required to pay a fee of Rs. 1100. Out of this Rs. 1100 amount of Rs. 100 is the Trust Registration fee and other Rs. 1000 are the charges of keeping a certified copy of the Trust Deed with the Sub-Registrar.
Once the applicant submits all the required papers, he/she can collect a certified copy of the Trust Deed. Such a copy can be collected within a time period of one week from the office of the Registrar.
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5
Submission of Trust Deed to the Registrar
After the receipt of the copy of the Trust Deed, the applicant is required to submit the same along with properly attested photocopies of all the necessary documents with the office of the local registrar.
Furthermore, the settler should put his/her signatures on every page of the photocopy of the Trust Deed. Also, it is mandatory for all the settlers as well as the two other witnesses to be physically present along with the identity proofs (original as well as the self-attested photocopy of the same) at the time of Trust Registration in India. However, the physical presence of Trustees of the Trust is debatable.
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6
Obtain the Certificate of Registration
After the submission of the Trust Deed with the Registrar, the registrar will retain the photocopy of the Deed and return the original registered copy of the Trust Deed.
After the completion of all the formalities, a Certificate of Registration will be issued to the applicant. Such a Certificate of Registration will be issued within a minimum of seven working days
What are the Penalties that can be levied on Breaches in Compliances of Trust Registration?
There are three types of penalties that can be levied in case of non- compliances of trust registration that are mentioned below:
- Civil And Criminal Penalties: In case of Breach of trust, section 405 to Section 409 of the Indian Penal Code 1860 can be imposed on the beneficiary that means both civil and criminal penalties may be imposed.
- Application For Tax Deduction Account Number: On registration of a trust or an establishment, the trust or an establishment should apply for tax deduction account number in form number 49B of Income Tax rules to Assessing Officer or the prescribed authority and quote the tax deduction account number 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. In case of non- compliance of above sections, a penalty of Rs. 10,000/- can be levied as prescribed under section 272BB.
- Failure To Furnish The Return Of Income: If the trust or institution fails to furnish the return of income then it attracts penalty under the Act. If the certificate for the TDS has not been provided along with the ITR due to the default of the payer in not furnishing such certificate then the ITR will not be considered as defective. However, the certificate is required to be produced within 2 years from the end of the assessment year.
What is the Impact of Section 12AB on Trust Establishments?
To continue taking exemption below section 10 or 11 all the present charitable trust or establishments are mandatorily needed to get a fresh registration under Section 12AB which are already registered under the below mentioned section:-
- Section 12A
- Section 12AA
- Section 10(23C)
- Section 80G
Is it necessary to E-file the ITR for a Trust?
A trust should file a ITR electronically-
- With or
- Without a Digital signature.
- Under the Electronic Verification Code.
However, trusts who are liable to get its accounts audited section 44AB shall furnish the return electronically.
FAQs on Sole Proprietorship
Yes, a trust should get the registered under section 12AB of Income Tax Act, 1961 to get the exemption under section 11.
In a strict legal sense, a trust isn’t a separate legal entity, not like an organization. A trust gets created once the settlor hands over any property to the trustee to be used and used for the advantage of the beneficiary. This legal arrangement is codified vide a trust deed.
- Settlor
- Trustee, and
- Beneficiaries
- Private Trust
- Public Trust
Trustor is that the one who creates the trust, whereas the one who has the responsibility of managing the trust for the beneficiary i.e. Trustee.
Trusts are governed under The Indian Trusts Act, 1882 in India.
By and enormous an charitable trust is created for setting up a school, universities, alternative instructive activities, clinic, mature age homes, halfway house, for advancement of child welfare and their strengthening, government help of a lot of fragile section 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 owner is needed
- Particulars of the Trustee and settlor
- Trust Deed on correct Stamp Value.
- Photographs & PAN of Trustee and settlor.
- Select a correct Name
- Drafting of Trust Deed
- Selecting Settlers and Trustees of Trust
- Preparing Memorandum of Association
- Paying the Requisite Fees
- Collection of a duplicate of Trust Deed
- Submission of Trust Deed to Registrar
- Obtain Registration Certificate
