TRUST

TRUST

A Trust can be made by completing a trust deed; the trusts are of two types. A private trust which is created for the benefit of an individual also know as a beneficiary or particular group and the second one is a public trust also known as charitable trust is created or made for the benefit of the general public.

The first and foremost step to register a trust starts from drafting a good trust deed. IT is important that any trust deed is to be created on appropriate non-judicial stamp paper, every state has its rate of stamp duty. The second step is to book an appointment based on the registered office of the trust jurisdiction with the sub-registrar office, along with the government registration fee.

As per the appointed date assigned by the sub-registrar all trustees along with trust deed need to be present with two witnesses. It takes approx. two weeks for the registration process by the office of the sub-registrar, after that collect Registered deed can be collected. The third and most important step is to get the PAN Number and TAN Number allotted for the trust and then you can open a Bank A/c with any bank for your registered trust.

BENEFITS OF TRUST

• To Involve In Charitable Undertakings
  A Charitable Trust is primarily a way to set up your assets to benefit you, concerned beneficiaries, & a charity simultaneously. Such Trust could render various advantages for a person seeking to aid society with nonessential assets, such as stocks or real estate.
• Accessibility to Tax Exemptions
  All registered trusts in India have access to several tax exemptions offered by the Income-tax department. Since the object of the Trust doesn’t revolve around profit generation, like NGOs, they are eligible to avail various tax relaxations. However, such a benefit is only available to trust that have a registered deed at their disposal.
• Trusts are very useful in ensuring taxation relaxation on capital and income. The Trust may facilitate better coverage for the settlor, the beneficiaries & the trust assets from stringent tax provisions.
• Provide Benefits to Financially Aggrieved Individual
  The registered Trust facilitates the much-needed financial aid to the poor people and the masses via charitable activities.
• Encounter Minimal Legal Hindrances
  The Indian Trusts Act, 1882, ensures comprehensive legal protection for the Trust. It also prevents any third party to make an unnecessary claim that could endanger the legal standing of Trust.
• Ensures Legal Coverage for the Family Wealth
  Trust can be used to allocate specific assets such as land/an interest in the entity formed by the family, which otherwise would not be practical for a trustor to split between individuals.
• Avert Probate Court
  Anybody can leverage trust registration as a tool for transferring an asset to the heir in the absence of a Will. As the legal title of the assets transfers from the settlor to the Trustee in case when they are "settled", there is no change of ownership after settlor demise, thus evading the requirement for probate of a will on account of trust assets.
  Unlike probate, the trust acts as a private agreement that skip the requirement for additional registration. The use of a trust can also avert the economic adversity often encountered by surviving spouse even as waiting for grant of probate.
• Immigration/Emigration of Family
  When an individual & her/his family move to another nation, it is a perfect event to establish a trust to get rid of taxation in the destination country, thereby safeguarding the family assets and facilitating flexibility in its organization.

ypes of Trusts

There are three types of trusts in India:

• Public Trust
• Private Trust
• Public Cum-Private Trust

While private trusts function as per the provisions of the Indian trusts Act, 1882, 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.

Private Trust

Private Trust refers to a legal arrangement created for the benefit of individuals other than a public or charitable purpose. It is formed for the financial benefit of one or more beneficiaries who are known to the Trustor. Private Trust doesn’t serve a charitable purpose, and its benefits are only accessible to designated beneficiaries. Such trusts are bound to follow the provisions of the Indian Trusts Act, 1882.

Public Trust

A Public Trust essentially benefits the public at large. Unlike private trusts, public trusts do not function under the Indian Trusts Act and are formed to serve a charitable or religious purpose. Such Trust follows the general law, which is in effect for the time being. Just like the private Trust, these trusts may be formed inter vivos by will.

Public-Cum-Private Trusts

As the name suggests, the Public-Cum-Private Trusts serve a dual purpose. They are eligible to use their income for the public as well as private purposes. That implies that beneficiaries of such Trust could be either public or private persons or both.

Documents Required for Trust Registration

Following are key documents that one needs to arrange for trust registration:

• Proof related to Identity for Trustor & Trustee such as Aadhaar Card, Voter ID, Passport, DL
• Address Proof related to Registered Office such as Copy of Certificate of Property/Utility Bills
• No objection certification from the Landlord if the property is rented
• Trust deed's objective
• Detail about the Trustee and settlor such as Self-attested copy Id & Address Proof and occupation
• Trust Deed on Proper Stamp Value
• Trustee and settlor Photos
• Trustee and settlor PAN details

Trust deed must reflect the following information:

• Number of trustees
• Trust registered address
• Proposed name of trust
• Proposed Rules that will govern the trust
• Presence of settlor as well as two witnesses at the time of registration of Trust

Procedure for Registering a Trust in India

The detailed Procedure for trust registration entails the given steps:

1. Select an Apt Name for the Trust
   The first and foremost step in the process of Trust registration is the name selection for the proposed Trust. Be mindful while serving such a purpose and take the following points into account to avoid any hassles:
   • The name should fit the provisions of the Emblems and Names Act, 1950
   • There should be no violation whatsoever when it comes to Trademark Act.
   • The name should stay to the originality.
2. Drafting of Trust Deed
   Drafting of Trust Deed is an important undertaking because it is the only thing that makes the Trust legally enforceable.
   • The trust deed consolidates the below-mentioned clauses:
   • Objects: The Object clause reflects the object behind the formation of the Trust
   • Acceptance of Funds: This clause enables the Trust to accept contributions, donations & subscriptions from any person, government body, or charitable avenue, in the form of cash, immovable assets without any charge on it. Furthermore, the clause states that any contributions that hamper the Trust’s object are non-acceptable in nature.
   • Investments: The investment clause sets out the conditions for the lawful and effective administration of the Trust’s fund. Further, this clause also framed conditions for effective allocation of the additional funds that are not in use and could help in generating extra income via investment.
   • Power of the Trustees: This specific clause talks about the responsibilities of the trustees. Generally, such clauses confer the following powers to the trustees.
   • Accounts and Audit: This clause mandates the trustees to administer the book of account on a regular basis. Further, it also sets out the requirement for account auditing that should be conducted by the certified CA.
   • Winding Up: A trust is wound up when all of the Trust properties/assets are lawfully distributed to the beneficiaries or to a similar entity, either directly or via resettlement. The involved parties must identify any tax obligations incurred owing to the transfer of assets when the Trust is wound up. Furthermore, this clause renders the requirement of conducting such legal undertaking with the approval of charity commissioner/Court/any other law to mitigate any chances of legal dispute.

Frequently Asked Questions

Q. Is it mandatory to register for Trust?

Ans. Trust registration is still not considered a legal compulsion for a private trust that has a Will. In the case of a Public trust, whether in relation to moveable or immovable property & whether created under a will or inter vivos, trust registration is optional.

Q. How many types of trust registration are there?

Ans. A trust can be created via a trust deed. Presently, two types of Trust exist in India, mainly public trust and public trust.

Q. How is Trust formed in India?

Ans. A trust may be formed by any person who is competent to contracts: This includes a person, HUF, AOP, establishment, so on and so forth. If a trust is formed on or behalf of an under-aged person, then the consent of a principal civil court of original is required.

Q. What is the fundamental purpose of Trust?

Ans. Trusts are set up to facilitate legal coverage to the trustor’s assets, ensure that such assets are lawfully distributed among the designated beneficiaries, and avoid or minimize inheritance or estate taxes.

Q. What are the common documents required for Trust registration in India?

Ans. Common documents required for Trust registration given below:

Q. Can a trustee sell trust property in India?

Ans. A trustee, is authorized to sell land via public domain. He cannot sell the land by private contract.

Q. How do I register a trust for income tax?

Ans. To obtain registration u/s 12A, the application in form 10A for registration of a charitable or religious trust can be made on the IT department portal.

Q. Which is better, trust or Society?

Ans. Unlike trusts, a society excels on improved democratic set-up with membership & an elected body to administer the Society. The serving members of the Society can remain in control as long as they as elected to the managing committee. Also, they have the right to leave out Society whenever they want. Such rights are not available to trustees.

Q. Can Society be registered as a trust?

Ans. In Maharashtra & Gujarat, all societies must secure trust registered under the Bombay Public Trusts Act, 1950. A society may lead to winding up if 3/5th of the members have the intention to do so. A society is a more democratic and flexible set-up.

Q. What is the difference between a trust and an NGO?

Ans. To some extent, NGOs serve as an ancillary unit for a government that fulfil its philanthropic tasks. Trusts, on the contrary, are not dependent on the government’s programs. Trusts excel on separate policies since they can be private or public trusts.

Q. Does trust come under NGO?

Ans. All the forms of trust, NGOs, or Society are regarded as NGO. The only difference that separates these entities from each other is the registration and management processes.

Q. Is it a legal compulsion to file the return for a trust electronically?

Ans. It is a legal compulsion for all registered trusts to e-file IT return. If the Trust seeks to audit its account, then the IT return must be filed along with the Digital Signature of the certified CA who is accountable for carrying out the audit.