Trust Registration is governed by the Indian Trust Act, 1882 where the author (owner) assigns the rights of the property to a trustee so that the beneficiary i.e. the third person can take benefit out of it. The trust is carried out by way of an instrument called trust deed which is formed on a non-judicial stamp paper as per the stamp rates of the different states. Trust Deed is the core document which defines the reason for formation of trust, details of the author, trustee and the beneficiary. It lays down all the working and functioning of the trust until its closure. The trust deed is registered with the sub-registrar of the concerned jurisdiction. What is a Trust? Let’s understand the concept of trust with the help of an example:Mr Z wants to pass his bungalow (property) to Mr M for the benefit of his minor granddaughter. Mr Z passes his property to Mr M, because he reposes (has) confidence on Mr M. This is nothing but the essence of a trust. In simple words, a trust is nothing but a transfer of property by the owner (Mr Z) to another person in whom the owner has confidence (Mr M) for the benefit of a third person (Granddaughter of Z). The property doesn’t just mean real estate. It could be cash, shares or any other valuable asset. Further, the instrument by which this entire trust is declared/created is called “the instrument of trust” or the “trust deed”. Parties in a Trust Author/Settlor/Trustor/Donor (Mr Z): The person who wants to transfer his property and reposes confidence on another for the creation of the trust. Trustee (Mr M): The person who accepts the confidence for the creation of the trust Beneficiary (Mr Z’s granddaughter): The person who will benefit from the trust in the near future. Advantages of Trust Registration Litigation- Every Trust has its legal entity separate from its members it is capable of filing suits against any person or any member. The registered trust can file a suit anywhere in India and in any state even if it is not registered in that particular state. Legal status-Registration of trust gives it a legal status and that is very important because of various reasons like: for opening the bank accounts, Obtaining registrations and approvals under Income Tax Act, legally vesting properties. Tax Benefit- The trust can take the tax benefit after applying for the 12AA/80G Certificate. Both the trust and the investor get tax exemptions. Types of Trust Private Trust-Private trust is for a closed group. In other words, the beneficiaries can be identified. For example: A trust created for the relatives and friends of the author. Public Trust-It is a trust formed for public, religious or charitable purpose or both and includes a temple, or any religious or charitable institution and formed either for a religious or charitable purpose or for both. Objectives of a Trust in General The main objective is that the trust should be created for a lawful purpose. For example, if Mr Z had stolen money from a bank and given it to Mr M with the intention of giving the money to poor children then, in this case the trust itself is void as the very main purpose is unlawful. So how do we actually understand as to whether the purpose is lawful or unlawful? The answer to it lies in Section 4 of the Act. As per Section 4, all purposes are said to be lawful unless it: Is forbidden by law Defeats the provisions of law Is fraudulent Involves injury to another person or his property Immoral or against to public policy Document Required Self-attested copies of Identity Proof (Trustor, Trustee, Beneficiary) Photograph of Trustor, Trustee, Beneficiary Address Proof of Registered Office PAN Card of Trustor, Trustee, Beneficiary Process of Trust Registration The process of registering a trust in India is relatively simple and straightforward. The first step is to identify the type of trust you wish to create. There are two main types of trusts in India: private trusts and public trusts. Private trusts are typically created by individuals for the benefit of their family or themselves, while public trusts are created for the benefit of the general public. Once you have determined the type of trust you wish to create, the next step is to choose a name for your trust. The name should be reflective of the purpose of the trust and should be approved by the Registrar of Companies. The next step is to appoint trustees. Trustees are responsible for managing the affairs of the trust and ensuring that it operates in accordance with its objectives. You will need to appoint at least three trustees, who must be natural persons (i.e. not companies or other legal entities). Once you have appointed trustees, you will need to draft the trust deed. The trust deed is a legal document that sets out the rules and regulations governing the operation of the trust. It must be signed by all trustees and registered with the Registrar of Companies. The final step in setting up a trust is to fund it. This can be done by making a financial contribution to the trust, or by transferring assets such as property or shares into its name. Once you have completed all of these steps, your trust will be registered and operational. 12A and 80G Certificates Income Tax Department issues 12A certificate to the trusts or NGOs that are involved in social welfare. Such certificate is issued for a period of 5 years and can be renewed after making an application and is not liable to pay Income tax for the entire lifetime on its surplus income. Additionally, an NGO can also apply for 80G certificate. This certification provides the donor benefit under Income Tax Act as deduction. Comparison between Trust, Societies and Section 8 Company S. No. Basis Section-8 Trust Society 1. Governed by Companies Act, 2013 Indian Trust Act, 1882 Societies Registration Act, 1860 2. Registration
