Trust Registration

Contents Of Trust Deed

The trust deed is the most important document which defines the formation of a trust, it's working, its
functions & its closure.

The important clauses in a trust deed are as follows –

1 Name of the trust
2 Registered office
3 Objectives
4 Area of operation
5 Assets of the trust
6 Details of the founder
7 Details of the board of trustees
8 Powers & functions of management trustee & other trustees.
9 A Quorum of the board along with the terms, tenure & qualification.
10 Amendment & closure of the trust deed and the applicability of the act.

Documents Required For Trust Registration In India

The documents required for the registration of the trust are as follows –

ID proof of the founder of the trust
Registered office address proof (ownership document or rental agreement)
Properly drafted trust deed.
Two witnesses.

Reason For Registering A Trust

As per the public trust act, trust registration is mandatory in all states if its main motive is a charity or a
transfer of immovable property in the name of the trust. Tax exemptions are also provided to the registered
trust under sections 12A & 80G of the income tax act. Registration adds more credibility to the trust as it
involves public money in the form of donations.

Trust Compliances

After doing the registration, the founder of the trust should apply for the following things –

Obtain a PAN card
Filing of income tax annually
Bookkeeping & accounts
Professional tax registration (GST registration )
Shops & establishment license (In case of employment)

Constitution Of The Trust

The Board of trustees forms the trust and comprises of the following persons –

Founder or author of the trust
Managing trustees
Other trustees

A Quorum of the Board of trustees should not exceed a maximum of 21 members.

Tax Exemption Applicability For Trust
It is a general belief that trust need not have to pay tax as its main aim is to work for the benefit of the
people, but it's not true. Trust is a legal entity like others and is liable to pay tax. In case if trust wants tax
exemption, it has to obtain certification from income tax authorities for tax exemptions such as section 12A,
80G etc.

Benefits Of Trust Registration

Involvement in Charitable activities - Charitable trusts are established with the common goal of
engaging in charitable activities while collecting benefits for the donor, his heirs, and successors.

Tax exemptions for registered trusts - The other primary reason for establishing a registered trust is
to take advantage of tax exemptions. These charitable trusts are not-for-profit organisations, and in
order to take advantage of all of these benefits, the charitable trust must have a legal entity.

Provides benefits to poor people - By conducting charitable activities fairly, the registered trust
benefits the underprivileged and the public.

Compliance with Law - A trust compliance is maintained under the provisions of the Indian Trusts Act,
1882, to protect the trust from legal hindrance.

Family Wealth Preservation - Trusts can be used to own specific assets, such as land or a stake in a
family business, that would be inappropriate or impractical for the settlor to divide between
individuals. Through the use of trust, these individuals can benefit from the assets even though they do
not own them. Additionally, a trust will assist in preserving the capital worth of such assets for future
generations.

Avoid probate court - Since legal title to the assets moves from the settlor to the Trustee when they
are "settled," there is no change in ownership when the settlor dies, eliminating the requirement for
probate of a will with respect to trust assets.
Moreover, while grants of probate are public documents, trusts are private agreements that do not
need to be registered anywhere. Additionally, the use of trust might help alleviate the economic
hardships that a surviving spouse may face while waiting for probate to be granted.

Family immigration/Emigration - When a person and his/her family relocate to another country, it is
frequently the ideal/only moment to establish a trust in order to avoid paying taxes in the destination
country, thus protecting the family wealth and allowing for organisational flexibility. This type of
organisation requires in-depth professional advice and guidance.

Forced Heirship - Residents of countries with fixed legacy laws may be able to use trusts to profit from
the flexibility they provide in distributing a portion or all of their assets to beneficiaries who would not
be permitted to benefit under the rules of their home country. Such planning must be undertaken with
the assistance of legal experts in their country of residence/nationality.

Tax mitigation - Trusts can be quite effective at reducing capital and income taxes. The trust may
provide effective protection against punitive taxes for the settlor, the beneficiaries, and the trust
assets. A typical application of trusts is to mitigate or avoid inheritance tax in the settlor's jurisdiction,
but this will, of course, need the settlor to receive useful tax advice.

What Are The Other Certificates Required To Avail More Benefits?

Other Certificates That May Be Required in Order to Receive Additional Benefits
80G Certificate - Under the 1961 Income Tax Act, an individual or organisation donating to a Trust is
exempt from paying tax on the donation (Fully or partially).

12A registration - It is a one-time registration under the Income Tax Act, 1961, given by the Income
Tax Department. This certificate exempts a non-governmental organisation from paying income tax on
surplus income.

FCRA Registration - Organizations seeking foreign contributions to promote the activities/work
indicated in their company's mission statement must register with the FCRA. It is prohibited by
regulation from receiving foreign contributions without the approval of the Government.