Trust Registration in India: A Comprehensive Guide

Trusts have long been an essential tool for individuals and organizations to contribute to the welfare of society. In India, trusts can be registered under the Indian Trusts Act, of 1882, or the Bombay Public Trusts Act, of 1950. Trust registration is a crucial step for those who wish to create a legal entity to manage and administer their charitable activities. In this article, we will discuss the process of trust registration in India, its benefits, and the legal requirements that need to be fulfilled.

Benefits of Trust Registration

Trust registration in India provides various benefits to the trust and its beneficiaries. A registered trust can avail tax benefits under Section 12A and 80G of the Income Tax Act, 1961. It also helps in creating a legal entity that can hold property, enter into contracts, and sue or be sued in its name.

Registered trusts have more credibility and are perceived as more trustworthy by donors, making it easier for them to raise funds. It also ensures transparency and accountability in the functioning of the trust.

Types of Trusts

In India, trusts can be broadly classified into two types – public trusts and private trusts.

Public Trusts

A public trust is established for the benefit of the general public or a section of the public. Public trusts are registered under the Bombay Public Trusts Act, 1950, and are created for charitable purposes like education, healthcare, relief of poverty, and advancement of any other object of general public utility.

Private Trusts

A private trust is created for the benefit of a specific individual or family. These trusts are governed by the Indian Trusts Act, 1882, and are used to manage private properties, ensure succession, or provide for the welfare of specific beneficiaries.

Requirements for Trust Registration

Trust registration in India requires fulfilling specific legal requirements.

Trust Deed

The trust deed is a legal document that outlines the purpose, objectives, and mode of operation of the trust. It should contain the name and address of the trustees, the beneficiaries, the rules for the appointment and removal of trustees, and the manner in which the trust property is to be managed.

Trustee Appointment

A minimum of two trustees is required for the registration of a trust. The trustees are appointed in the trust deed and should be competent to enter into a contract. The trustees are responsible for the administration and management of the trust.

PAN and TAN

PAN and TAN are unique identification numbers issued by the Income Tax Department. PAN is mandatory for all entities, including trusts, for tax-related transactions. TAN is required for deducting and depositing tax deducted at source (TDS) on payments made by the trust.

Registration with Income Tax Department

To avail tax benefits, a trust needs to be registered with the Income Tax Department. It can apply for registration under Section 12A of the Income Tax Act, 1961, by submitting Form 10A.

Process of Trust Registration

The process of trust registration in India involves the following steps:

Preparation of Trust Deed

The first step in registering a trust is to prepare a trust deed. The trust deed should

contain all the necessary information, as mentioned above, and should be drafted in accordance with the laws and regulations applicable in India.

Application for PAN and TAN

Once the trust deed is prepared, the trustees need to apply for PAN and TAN with the Income Tax Department. The application can be made online, and the required documents need to be submitted along with the application.

Application for Trust Registration

After obtaining the PAN and TAN, the trust can apply for registration under Section 12A of the Income Tax Act, 1961. The application should be made in Form 10A and should be accompanied by a copy of the trust deed, PAN, TAN, and other relevant documents.

Documents Required for Trust Registration

The following documents are required for trust registration in India:

• Trust Deed
• PAN Card of the Trust
• Identity Proof of the Trustees
• Address Proof of the Trustees
• Passport Size Photographs of the Trustees
• Proof of Address of the Registered Office

Compliance Requirements for Registered Trusts

Once a trust is registered, it is required to comply with certain legal requirements, including:

• Filing of Annual Returns with the Income Tax Department
• Filing of Income Tax Returns
• Maintenance of Books of Accounts and Records
• Audit of Accounts by a Chartered Accountant

Conclusion

Trust registration is a crucial step for those who wish to create a legal entity to manage and administer their charitable activities. It provides various benefits, including tax benefits, credibility, and transparency. However, the process of trust registration involves fulfilling specific legal requirements and complying with various regulations. Therefore, it is advisable to seek professional help while registering a trust.

FAQs

1. What is the difference between a public trust and a private trust?

• A public trust is established for the benefit of the general public or a section of the public, whereas a private trust is created for the benefit of a specific individual or family.

2. Is it mandatory to register a trust in India?

• No, it is not mandatory to register a trust in India. However, registering a trust provides various benefits, including tax benefits and credibility.

3. Can a foreign national be a trustee of a trust in India?

• Yes, a foreign national can be a trustee of a trust in India, subject to certain conditions.

4. Can a trust engage in commercial activities?

• Yes, a trust can engage in commercial activities as long as the profits are used for the fulfillment of its charitable objectives.

5. Can the trustees of a trust be changed after registration?

• Yes, the trustees of a trust can be changed after registration, but it should be done in accordance with the rules and regulations applicable in India.