What is Trust Registration?

Trusts are incorporated for safeguarding properties and assets, developing sciences, literature, promotion of art and culture, poverty reduction, providing education to the needy and medical care. It is mandatory to complete trust registration before carrying out any operation in the name of trust. Trust registration in India is an official and legal process that involves the creation of a trust deed, a binding contract between the settlor (the individual creating the trust) and the trustee (the person responsible for managing the trust). An authorized registrar oversees the complete process and establishes a trust as a legal entity responsible for the proper and lawful distribution of the settlor's assets to the designated beneficiaries. The trust becomes legal entity and is ready for operations. Trusts in India can serve various purposes, such as reducing taxes, simplifying or avoiding the probate process, and safeguarding assets.

What is Trust Registration Rules?

In India, registration of a trust and mainly private trusts are governed by the Indian Trust Act of 1882. This Act provides the legal framework for trusts. Meanwhile  public trusts are categorized into religious & charitable trusts. The Religious Endowments Act 1863, Charitable and Religious Trust Act 1920, the Bombay Public Trust Act 1950, are some of the prominent statutes for the enforcement of public trusts in India. These laws define a trust as a legal settlement where the trust's owner called as settlor, transfers their property to an appointed trustee who is referred to as a beneficiary. The primary purpose of a trust is to ensure the transfer of the settlor's assets to the beneficiaries, which is mentioned in the trust deed. A trustee who the grantor or settlor chooses is responsible for administering the trust and ultimately distributing the assets to the beneficiaries designated by the grantor when the trust is established. Beneficiaries may include persons or entities such as legal heirs, family members, or charitable organizations.

What are the Types of Trust Registration?

There are primarily following types of trust in India: 

• Public Trust: Public trusts are registered as religious or charitable trusts. They are established with the objective of benefiting the general public at large. They do not fall under the jurisdiction of Indian Trusts Act 1882 and are governed by specific statutes, including the Religious Endowments Act of 1863, the Charitable and Religious Trust Act of 1920, and the Bombay Public Trust Act of 1950.
• Private Trust: A private trust is established for the financial benefit of specific individuals or beneficiaries rather than serving the public or charitable purposes. These trusts follow the provisions of the Indian Trusts Act of 1882.
• Public-Cum-Private Trusts: These trusts serve a dual purpose, allowing them to use their income for both public and private causes. Beneficiaries of such trusts can be either public or private individuals or both.

There are also several other types of trusts, each with distinct objectives, including:

• Revocable Trust
• Testamentary Trust
• Irrevocable Trust
• Asset Protection Trust
• Spendthrift Trust
• Special Needs Trust

What are the Documents Required for Trust Registration?

• For registering a trust in India, several key documents are necessary, including:
• Proof of Identity for Trustor & Trustee, such as Aadhaar Card, Voter ID, Passport, or Driver's License,  including self-attested copies. 
• Address Proof related to the Registered Office, such as a Copy of Certificate of Property or Utility Bills.
• A No Objection Certificate from the Landlord if the property is rented.
• Proof of occupation of trustee and trustor. 
• The Trust Deed on Proper Stamp Value.
• Photos of the Trustee and Settlor.
• PAN details.

The trust deed must include information about the number of trustees, the trust's registered address, the proposed name of the trust, proposed rules governing the trust, and the presence of the settlor and two witnesses during the trust's registration. 

What is the Process of Trust Registration?

Trust registration process is a relatively simple process in India which involves the following steps:

• Name and Type Selection for the Trust: The initial step in the trust registration process is selecting an appropriate name and type for the proposed trust. Precautions should be taken to ensure that the name complies with the provisions of the Emblems and Names Act of 1950, avoids trademark violations and plagiarism, and maintains originality.
• Appointment of Trustees: The next step in registration of a trust is to appoint trustees.Trustees are persons made responsible for managing the working of the trust and ensuring that it operates in accordance with its objectives. At least three trustees, who must be natural persons and not companies or other legal entities need to be appointed. 
• Drafting Trust Deed: The drafting of the trust deed is a crucial and legally binding step. The trust deed should include the following clauses:
• Objectives: Describes the purpose behind the formation of the trust.
• Funds Acceptance: Enables the trust to accept contributions, donations, and subscriptions from various sources in the form of cash or immovable assets. It also specifies that contributions conflicting with the trust's purpose are unacceptable.
• Investments: Sets out the conditions for the administration and investment of the trust's funds in accordance with the law, including the utilization of additional funds to generate extra income.
• Responsibilities and Powers of Trustees: It Defines the responsibilities and powers of the trustees, including appointing employees, alienating trust properties, opening bank accounts in the trust's name, and accepting gifts or donations.
• Accounts Management and Auditing Requirements: Mandates regular bookkeeping by the trustees and outlines the requirement for account auditing by a certified Chartered Accountant (CA).
• Winding Up: Addresses the legal process of winding up the trust, ensuring the lawful distribution of trust properties/assets to beneficiaries or a similar entity. It outlines the necessity of conducting this process with the approval of the charity commissioner, court, or other applicable legal authorities to prevent potential disputes.

What are the Benefits of a Trust Registration?

There are several benefits of trust deed registration. Some of the benefits of online trust registration are:

• Charitable Undertakings: Registration of a trust enables individuals to use their assets for the benefit of both designated beneficiaries and charitable causes simultaneously. This approach is advantageous for those looking to contribute to society with non-essential assets like stocks or real estate.
• Taxation Benefits: All registered trusts in India are entitled to various tax exemptions provided by the Income Tax Department. Since the primary objective of a trust is not profit generation, similar to NGOs they are eligible to benefit from multiple tax relaxations. However, these benefits are only available to public trusts with a registered deed. Public trusts in India are eligible for tax benefits if they register themselves as charitable trusts under the Income Tax Act Sections 12A and 12AA.
• Financial Aid for the Needy: Registered trusts can provide much-needed financial assistance to disadvantaged individuals and communities through charitable activities.
• Minimum Legal Hurdles: The Indian Trusts Act of 1882 ensures comprehensive legal protection for trusts and prevents third parties from making unnecessary claims that could jeopardize the trust's legal standing.
• Protection of Family Wealth: Trusts can be used to allocate specific assets, such as land or ownership interests in a family business, which may be impractical to distribute among individual family members.
• Simple Registration: Online trust registration is a simple process. The procedure is easy to carry out. Simply complete the trust registration form using the proper format. Reach out to Apka Tax and initiate the process. We will help in completing the trust registration in shortest possible time. 
• Averting Probate Court: Trust registration can be leveraged as a tool to transfer assets to heirs without a will. This eliminates the need for probate of a will for trust assets, as the legal title of the assets transfers from the settlor to the trustee when the trust is "settled." Unlike probate, the trust acts as a private agreement, skipping the need for additional registration and potentially averting economic difficulties faced by surviving spouses during probate.
• Beneficial In Family Immigration/Emigration: Establishing a trust can be advantageous when an individual and their family decide to move to another country. It can help reduce taxation in the destination country, safeguard family assets, and provide organizational flexibility.

What Compliance is Required for Trust Registration?

After successfully registering a trust, several essential compliance steps must be undertaken:

• Obtaining a PAN Card: The trust should obtain a Permanent Account Number (PAN) card to facilitate financial transactions and ensure tax compliance.
• Maintain Accounting and Bookkeeping: Trusts are obligated to maintain meticulous accounting and bookkeeping records to document financial transactions and reflect transparency.
• File Annual Income Tax Return (ITR): Annual income tax returns must be filed in accordance with tax laws to fulfill tax obligations.
• Shop and Establishment Registration: Depending on the trust's needs and activities, it may need to obtain a Shop and Establishment registration as required by local regulations.
• GST Registration (if applicable): If the trust's activities involve the supply of goods or services and meet the threshold criteria, GST (Goods and Services Tax) registration may be required.
• Professional Tax Registration: Trusts may also be subject to professional tax registration and obligationsis necessary if applicable.

Non-compliance with trust registration can lead to both civil and criminal penalties. Criminal breaches of trust are addressed in Sections 405 to 409 of the Indian Penal Code of 1860. Additionally, penalties are applied for failing to obtain a Tax Deduction Account Number (TAN) or failing to furnish a return of income.

What is Trust Registration Eligibility?

Contrary to a common misconception, trusts are not automatically exempt from taxes. Like any other legal entity, a trust is indeed liable for taxation. To enjoy tax exemption, a registered trust must satisfy the requirements outlined in Section 12A and 80G registration of the Income Tax Act and subsequently, provide the necessary certifications. Compliance with these provisions is essential for a trust to achieve complete tax exemption and fulfill its obligations in accordance with the law. To ensure continued exemption under Sections 10 and 100, all active charitable trusts or institutions registered under Sections 12A, 12AA, 10(23C), and 80G must secure new registration under Section 12AB. Trusts registered under Section 10(23C) or Section 12AA must also renew their registration under Section 12AB. Section 12AA, which outlines the registration process, will no longer be in force. Section 12AB will take effect as per the granted registration date or the last date by which the application for registration and permission is required.

What is Trust Registration Assist?

What is the Trust Registration Fees?

Are you looking for Trust Registration Fees then here the details for you. The Trust Registration cost start from ₹3000 to ₹30000 along with Government Fee ₹ Nil and Professional Fee ₹ Nil.

FAQs