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Overview: Trust Registration in India
A trust is a legal arrangement where a settlor transfers ownership of property to a trustee, who manages it for the benefit of beneficiaries. Trusts provide a structured way to ensure that assets are used according to the settlor’s intentions, whether for family planning or charitable purposes. In India, trusts are primarily regulated under the Indian Trusts Act, 1882 for private trusts, while public trusts fall under state-specific laws.
What is a Trust?
As per Section 3 of the Indian Trusts Act, 1882, a trust is "an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner."
In simple terms, a trust involves a settlor transferring assets to a trustee, who must manage them as per the trust deed for the advantage of the beneficiary. This fiduciary setup ensures that the trustee acts in good faith for the beneficiaries.
Key Parties in a Trust
- Settlor: The individual who creates the trust and defines its purpose.
- Trustee: The person or entity that manages the trust's assets.
- Beneficiary: The person or group that benefits from the trust.
Legal Framework
Private trusts are governed by the Indian Trusts Act, 1882. Public trusts are governed by state-specific laws. Other relevant acts include the Income Tax Act, 1961, which offers tax exemptions, and the Societies Registration Act, 1860.
Who Can Create a Trust?
Any individual or entity competent to contract, including partnerships, companies, and associations, can form a trust under Section 7 of the Indian Trusts Act, 1882.
Types of Trusts in India
1. Public Trust: Formed for charitable or religious purposes, governed by state laws.
- Public Charitable Trust: For public welfare—education, healthcare, poverty relief.
- Public Religious Trust: To support religious activities and places of worship.
2. Private Trust: Formed for specific individuals or groups, governed by the Indian Trusts Act, 1882.
- Specific Trust: Predetermined asset distribution to named beneficiaries.
- Discretionary Trust: Trustee decides asset distribution.
3. Public-cum-Private Trust: Serves both public and private interests simultaneously.
Advantages of Trust Registration
- Legal recognition for entering contracts and owning property.
- Access to tax exemptions under the Income Tax Act.
- Continuity despite changes in trustees.
- Enhanced trustworthiness among donors and the public.
- Protection of settlor and beneficiary interests.
Eligibility for Trust Registration
- Minimum of two individuals required; at least one trustee must be a resident of India.
- The purpose must be lawful and not harm public interest.
- All parties must be legally competent.
- Trust deed must be well-drafted and reflect all interests clearly.
- Trustee must act in the best interests of beneficiaries.
Process of Trust Registration in India
The process of registering a trust in India involves a series of legal steps to ensure the proper establishment and functioning of the trust. Below is a step-by-step guide to registering a trust:
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STEP 1: Choose the Name of Trust
The first step in registering a trust is selecting an appropriate name. The name must comply with the Emblems and Names Act, 1950, and must not violate the Trade Marks Act, 1999. Ensure that the name is unique and does not resemble any existing trusts or businesses.
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STEP 2: Draft MOA and Trust Deed
The Memorandum of Association (MoA) defines the relationship between the trustee and the trust, detailing the trust's purpose. The Trust Deed is the main agreement that outlines the rules and regulations of the trust, including the duties and responsibilities of the trustees and how beneficiaries will be supported.
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STEP 3: Register the Trust Deed
After drafting the trust deed, the next step is to register it at the sub-registrar office. The following documents are required:
- The Trust Deed
- Identity and Address Proofs of the Settlor and Trustees
- Passport-sized Photographs of the Settlor and Trustees
- Proof of the Trust's Registered Office Address
Note: The Settlor and at least two witnesses must be present during registration. Once the Sub-Registrar verifies the details, the Trust Deed is registered, and a certified copy is issued.
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STEP 4: Obtain the Trust Registration Certificate
After the registrar reviews and verifies the submitted documents, and confirms compliance with all legal requirements, the trust will be officially registered. The registrar will issue the Trust Registration Certificate.
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STEP 5: Obtain PAN and TAN for the Trust
Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the trust via the Income Tax Department's online portal.
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STEP 6: Open a Bank Account
Once the trust has obtained its PAN and TAN, open a dedicated bank account in the trust’s name to manage its financial activities and funds.
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STEP 7: Apply for 12A and 80G Registrations (if applicable)
To avail tax exemptions and allow donors to claim tax deductions, apply for 12A and 80G registrations under the Income Tax Act, 1961.
How Can We Help You?
At Kanakkupillai, we specialize in providing affordable and stress-free trust registration services. Our team ensures a smooth and efficient process by handling every aspect of registration. We guide you step-by-step, ensuring full legal compliance and clarity throughout.
- Document Preparation: We assist in drafting and compiling all the necessary documents for trust registration, ensuring accuracy and compliance.
- Application Submission: Our experts manage the filing of your application and all supporting documents with the relevant authorities.
- Regulatory Liaison: We work directly with the authorities to monitor the progress of your application and address any queries, keeping you updated throughout the process.
Choose our affordable and professional trust registration services to ensure your trust is set up correctly and efficiently, in full compliance with all legal requirements.
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