Individuals form trusts for setting a particular part of the assets or the property for the benefit of another person.
A specific asset or a property transferred from the trustor to the trustee for the future benefit of the beneficiary is known as trust.
The beneficiary is another party (third-party) who may be related to the trustor and trustee.
Hence, the relationship that brings the parties to the trust is crucial to define trust. Under the Indian Trusts Act, 1882, the meaning of trusts has been provided as a relationship that persists between the trustor and trustee to hold some specific benefit for the beneficiary.
The primary regulatory Authority for trust registration is the Registrar of Trusts. The registrar of trusts maintains all the information on the trusts which have been registered in India. The Trusts Act, 1882 govern registrations of Private Trusts.
Any act does not govern Public Trust registration. Trusts registered in different states have separate state acts which the applicant has to be aware of. Registering trusts in Bombay would come under the jurisdiction of the Bombay Public Trust Act. Public trusts in India require to be registered with the respective state authority (if required).
1. Private Limited Trusts
Private Limited Trusts are formed for conducting activities for the individuals, family, or close ones. The Trusts Act, 1882, governs private limited trusts.
2. Public Limited Trusts
Public limited trusts are typically formed where the beneficiaries include the public at large. Usually, public trust will be established for charitable, educational, and religious purposes. In India, the most common public trusts are charitable and religious trusts.
A society is formed mainly for the promotion of science, arts, commerce. All the activities conducted by society are non-commercial. Therefore, activities conducted by society are for non-profit purposes. Societies are regulated under The Societies Registration Act, 1860.
4. A Company formed under Section 8 of the Companies Act (2013)
Private limited companies can be under section 8 of the company’s act. However, these companies cannot carry out businesses to make profits. Companies formed under this have the objectives of promoting education, crafts, science, arts, sustainability development, and environmental activities.
By registering the trust, the applicant can carry out different types of charitable activities for the society.
Donors can Claim Tax Exemptions
By donating to the trust, the donors can avail facilities such as tax exemptions under the respective Income Tax Act, 1961
Compliance with Law
By registering the trust, compliance would be maintained under the provisions of the Indian Trusts Act, 1882.
Trusts are formed for the sole purpose of promoting non-commercial activities. These activities have to be in the field, promoting development in the field of arts, science, education, and the environment. Therefore registering a trust is crucial. The following benefits are obtained from registering a trust in India.
1. Name of the Trust - The parties of the trust must choose the name of the trust first. The name of the trust must not go against the provisions of any act such as Trademarks, Copyrights Act, and Intellectual Property Rights Act. Additionally, the name of the trust must not go against the Emblems and Names Act, 1950.
2. Settlers of the Trust- The parties must decide the settlers of the trust. Apart from this, there is no amount of limit on the number of trustees that have to be considered. There has to be a minimum of two trustees for the formation of the trust. However, the author cannot be a trustee of the trust. Another requirement is that the trustee has to be a resident of India.
3. Form Memorandum of Association for the Trust- Memorandum of Association of the company is a document which states the objects which the trust is formed for. Similarly, the trust has a respective memorandum of association (MOA). This includes the objects of the trust what the trust is formed for. Only legal objects are required to be carried out by the trust.
4. Draft the Trust Deed - A trust deed is considered as a legitimate document for forming the trust. The trust deed must be produced to the companies' registrar when the trust is formed between the parties. While drafting the trust deed, the following have to be kept in mind:
5. Submit the deed to the Registrar - Once the deed is drafted, it must be submitted to the registrar. The following parties will be involved in drafting the deed. The author, the trustee, and the beneficiary. All the terms and conditions related to the deed would be mentioned in the trust deed. The trust deed operates something like articles of association in a company. It contains all the bye-laws and other relevant information regarding the trust. It must be on a stamp paper under the provisions of law. The amount which has to be paid on the stamp paper must be according to the property value.
6. Obtain Certificate of Trust Registration - On viewing all the documents, if the registrar is satisfied that the documents are in good order, then the trust will be registered. The registrar will provide the trust registration certificate. This trust registration certificate has to be kept with the trustee and the trustor. After this is completed, the respective bank account can be opened.
NGOs are non-government organizations that are only engaged in carrying out philanthropic activities. An organization carrying out a trust will also carry out similar activities.
Yes, a private trust has to be registered under the provisions of the Registration Act, 1908.
The individual carrying out the trust registration process has to only consider making the deed of the trust or a trust deed.
Yes, it is mandatory to register a trust. The trust must be registered with the registrar of trust. While registering religious trusts is not compulsory, it is advisable to register all forms of trust to avoid any legal issues.
Trustor is a person/ individual who creates the trust. The trust is created for another person known as the beneficiary. The trustee has the responsibility of managing the trust for the beneficiary.
The main law which is applicable for trust registration is the Indian Trusts Act, 1882. Apart from this there is also other legislations which govern the provisions related to trusts in India.
First and foremost, the applicant has to know the activities which are covered by the trust. Then the applicant has to select an appropriate name for the trust. After this the deed of the trust has to be drafted. After this process is carried out, the applicant has to go for trust registration. In the final step, the applicant would secure a PAN and TAN.
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