Procedure for Registration of Trust under the Indian Trusts Act, 1882 (Delhi / NCR / India Level) – Steps to Follow Prior to 12AA / 80G Registration under Income Tax Act, 1961
Trusts are Registered under law on the instrument of Trust Deed. The Deed is to be signed and Thump impression of All the Trustees, witnesses and authors or settlors of the Trust.
1. Before you register your trust you will need to decide the following:
a) Name of the trust
b) Address of the trust
c) Objects of the trust(charitable or Religious)
e) Two trustees of the trust (including one Settlor himself)
f) Property of the trust-movable or immovable property
2. Prepare a Trust Deed on stamp paper of the requisite value
3. Requirement for registration of Trust Deed with the Local Registrar under the Indian Trusts Act, 1882:
a) Trust Deed on stamp paper of requisite value
b) One passport size photograph & copy of the proof of identity of the settler
c) One passport size photograph & copy of the proof of identity of each of the two trustees.
d) One passport size photograph & copy of the proof of identity of each of the two witnesses.
e) Signature of settler on all the pages of the Trust Deed
f) Witness by two persons on the Trust Deed.
4. Go to the local registrar & submit the Trust Deed, along with one Photocopy, for registration. The photocopy of the Deed should also contain the signature of settler on all the pages. At the time of registration, the settler & two witnesses are required to be personally present, alongwith their identity proof in the original.
5. The Registrar retains the photocopy & returns the original registered copy
of the Trust Deed.
Few Key Points
- For registering a trust you need minimum two trustees (i.e. one settler and another person). You can decide the maximum number of trustees and this number must be mentioned in the trust deed. All the trustees together are called Board of Trustees. This board collectively governs the trust.
- Unlike societies, in case of trusts all or some of the trustees can be related persons.
- All the trusts are allowed to work on all India level
- Trusts are irrevocable –unless it is mentioned in the trust deed. This means that the trust cannot be wound up
- Trustees are usually life-long members or their tenure is specified in the deed. Electoral process is not involved in the appointment of trustees.
- Board of Trustees can also have various designations for trustees. Common designations are Chairperson and Managing Trustee
- Trustees cannot draw any remuneration from the trust fund. However, they may take reasonable compensation for the professional services they provide to the Trust.
- There is no explicit restriction on NRI persons becoming trustees.
- There no difference between a trust and a foundation.
- Profits earned by the Trust (e.g. interest gained from bank) cannot be distributed among the trustees. (Utilisation of Profits must be in accordance with Income Tax Act, 1961 if also registered therein)
- Trust Deed can be amended through a Supplementary Trust Deed.
- Most important part of the Trust Deed that you should pay special attention to is objectives of the trust. You should be as thorough as possible in writing down trust objectives so that you can function smoothly without any problems.
Trust Registration: Other Important Points
- Trust income is exempted from income tax. Bu to avail this facility, after registration, you need to acquire a certificate from the Income Tax Department. This certificate is called u/s 12A
- Donations to the public charitable trusts are also exempted from tax (i.e. the donor will not have to pay tax on the amount he donates to the trust). For this, you need to acquire 80G certificate from Income Tax Department.
- After registration of the Trust, one can proceed for acquiring 12A and 80G certification under Income Tax Act, 1961.
Author | CA Ankit Gulgulia (Jain) | +91-9811653975