TRUST REGISTRATION
TRUST REGISTRATION
In business, there’s always a risk of loss, but it shouldn’t fall on someone who didn’t cause it. That’s why we include an indemnity clause in our agreements. It means that if there’s any loss, the responsible party has to fix it or pay for it. It’s about making things fair and holding people accountable for what happens.
TRUST MEANS :
Trust means basically a foundational structure aimed at creating the noble intentions to promote, and develop the scientific literature, such as promoting education, and offer medical support to the society and people. In India anyone can create trust with certain limitations. The Indian trust Act 1882 governs the right to establish the private trust in India. But this act is not applicable for Waqf, customary, personal law, religious etc. The public trust is usually governed by the state government with specific legislation.
PURPOSE FOR TRUST :
According to the Indian Trusts Act, the purpose for forming a trust must be specifically for charitable purposes with the following objectives, They are :
- Education
- Health
- General charity
- Religion / Rural development
The main idea for the trust is to run for the common purposes for the individuals or the society.
TRUST AGREEMENT :
A trust agreement is the legal agreement which contains all the terms and the conditions relevant to the trust and legal provisions that allows the trustor’s to transfer the asserted ownership to the trustee for the trustor’s beneficiaries. The trustee should manage the assets and the property on behalf of the beneficiary. The agreement outlines the responsibilities of the trustees and how the allocated funds should be distributed and other legal requirements should be promoted by this agreement.
PARTIES INVOLVED IN THE TRUST AGREEMENT :
There are three parties are involved in the creation and organisation of the trust, they are :
- Trustor (settlor)
- Trustee
- Beneficiary
TRUSTOR :
The trustor is the person who established and created the trust. He is the real owner of assets and the property in the trust. The trustor should appoint the trustees for the trust.
TRUSTEE :
The trustee is the person entirely entrusted with the responsibility with the certain responsibility of managing and maintaining the activities in the trust. The trustee also administers the trust property for the trustor to get benefit from trust. In general the person who accepts the confidence for the creation of the trust.
BENEFICIARY :
The beneficiary is the person to whom the trust was created. The beneficiary is the third party jointly receiving the benefits from the trust. The rights of the beneficiary shall depend on the state laws and the type of the trust. The rights such as monitoring the trust, taking legal action if the trustee breached the agreement.
TYPES OF TRUSTS :
The trust can be classified into three types based on the activities.
- Public trust: the public trust is mainly focused on the benefits of the general public, largely. The public trust is governed by the government,and other institutions and individuals which mainly focuses on the public and the society. Eg : Charitable institutions, NGO, educational institutions are the example for the public trust.
- Private trust : Basically the private trust is mainly focused on the closed group or the small group. The private limited trusts are governed by the Trust Act of 1882. It was created for specific purposes by the beneficiary. Eg: Private associations
- Public cum Private trust : It is the combination of both the public and the private trust where the benefits should be of equal purpose for the public as well as the private persons the trust should act for a basic intention.
The public trust is entitled to all the tax benefits but the private trust is not applicable for any tax exemptions. But the Public cum Private trust should be tax exempt only based on the nature of the trust activity.
WHO CAN CREATE THE TRUST :
The trust may be created by every person who is entered into the contract that includes with the individuals, associations and for public use. Further it may depend on the social welfare who promotes certain benefits to the society in the way of trust.
According to Section 7 of the Indian Trusts Act, 1882, a trust can be created in India by the following persons:
- Any person having legal capacity (under Section 11 of the Indian
Contract Act, 1872);
- Hindu Undivided Family;
- Association of Persons (AOP);
- Company
In certain cases, like if a trust may be created on behalf of the minor person, the permission of the civil court of original jurisdiction is required.
BENEFITS OF REGISTERING TRUST :
The registration of the trust granted following advantages to the institution or organisations.
- Charitable purposes : the trust which acts for charitable purposes, the government should allot certain funds which benefit the trust and the other purposes of the trust.
- Tax exemptions : the registered trusts are applied for the tax exemptions from the following. This improves the growth of the trust by exempting their Taxes.
- Financial help : The registered trusts were financially supported by the government, including NGO and other institutions for the promotion of the trust and the charitable activities.
- Legal support : The legal support which includes the registration should protect the trust under the trust act of 1882. Which safeguard from the unnecessary claims from others.
- Other supports : The other supports which include the supports from various sources either the allocations and protection should be applied. The registered trusts are having great benefits from various sources.
These are the various supports and the benefits which are available by the registered trust.
PROCESS OF REGISTRATION OF TRUST AGREEMENT :
STEP 1 : NAME APPROVAL :
In this step the name should be selected for the trust in which it complies with the certain provisions which are relevant to Emblem and names act, 1950. After the parties should select the appropriate name. The selected name should be examined and approved by the Ministry of Corporate affairs.
- The selected name should end with the word “trust”.
Eg : ABC Trust, Care India trust.
- The name should not violate any other trademark and the name should be unique originally.
STEP 2 : DRAFTING TRUST DEED :
The drafting of the trust deed is one of the main important steps for the registration process. The drafting of trust deed basically contains all the overview about the trust, purposes, duties, benefits, goals of the trust and other complainants such as terms and conditions of the trust.
Also it determines the parties who act as trustor (settlor) of the trust and the counts of the trustees has no restrictions but there should be a minimum of two trustees if necessary. While the trustor (settlor) should not act as the trustee. And all the trustees should reside inside in India.
The memorandum of association (MOA) should be created for the trust and it includes the certain objectives and goals and the person who involved in the trust agreements also other legal liabilities
DOCUMENTS REQUIREMENTS FOR TRUST REGISTRATION :
For the registration of the Trust there should be a need for certain documents which is necessary and important for the process of registration.
- The respective stamp Values for the trust deed
- PAN card of the parties.
- Address and identity proof of the parties involved also with two witnesses.
- Address proof of the Trust resigned office.
- Photo copies of the parties and two witnesses.
- NOC (No Objection Certificate copies for maintaining trust )
- Income tax certificate of 12A registration and 80 G certificates for the Tax exemption for the trust.
The following documents with copies are required for the registration of the trust.
STEP 3 : SUBMISSION FOR REGISTRATION :
The drafted deed with all the necessary documents should be submitted to the appropriate register office for the process of registration. The registration and sub registrar fee should be paid by the party for the registration. The examination of deeds should be done by the Sub-registrar, at that time all the parties involved in the trust should be present before the registrar, after the examination the registration may happen. The certificate for the registration should be issued for the trust.
Once the registration is done for the trust, a bank account should be opened in the name of trust. All the legal rights had been granted for the trust.
PENALTIES FOR VIOLATION AND COMPLICATION OF TRUST :
The penalties and the legal action for the violation of the rules and the regulations which are mentioned in the guidelines of the trust agreements.
CIVIL AND CRIMINAL PENALTIES : The violation of the provisions in the trust deed incurs both the civil and the criminal compliances. If the parties such as trustor, trustee and the beneficiary should violate the guidelines , they are punished by Section 405 to Section 409 of IPC (Indian Penal Code) 1860. The provisions basically outline the criminal breach of the trust.
FAILS TO PROVIDE RETURN OF INCOME : The trust should provide the Tax exemption certificate to the appropriate income tax officers. If the certificate is not provided for the tax evacuation,by the trustee. The trust should face the legal consequences under the Income tax act if it fails to return the income.
The trust or the registered organisation should make an official request to the assessing officer to provide the allotment of the tax deduction for the trust. The trust can use the certificate provided by the IT department for the exemption.
In case the certificate is not filed to the income tax department for the assessment year. The section 272BB of Income tax act should levy the penalty of Rs 10,000 for the act of the trust. Maintaining the trust and all the other activity by the trustee. So the trustee is liable for the disputes.
WINDING UP OF THE TRUST :
The process of winding up or disclosing the trust. In case the time period covered by the agreement ends, The process may happen when all the trust properties, shares and assets are equally divided or distributed to the beneficiaries by the direct settlements. If the trustees should act for themselves other than the legal agreements. Other unlawful purposes by the charity or the trust. The legal winding up of the trust may happen.
THE DIFFERENCE BETWEEN THE TRUST AND THE SOCIETY :
FEATURES | TRUST | SOCIETY |
Meaning | The founder assigns the property to the Trust for the gain of the Beneficiaries. | A group of people joined together for a common purpose and to achieve the common goal. |
Act | The trust comes under the Indian Trust Act, 1882 | The society comes under the view of Society Registration Act, 1860 |
Requirements | For the trust trustor and Two Trustees (Founder himself can also be a Trustee | The associative members are necessary for the formation of the society eg : group of peoples or members. |
Management | All the management of asserts and the property should be maintained only by the Trustees | The society should managed by the Office Bearers such as President, Secretary, Treasurer |
Voting System | No Voting system should be conducted for the Decision making, trustee itself make. | The voting system governs the Society or by the peoples Eg: panchayat |
Geographical Operation | The registered trust should not need any permission. | A Separate Registration is needed for the All India Operation. State to state it was changed. |
FAQ
FAQ ON TRUST REGISTRATION :
WHAT DO YOU MEAN BY TRUST AND ITS PURPOSES ?
Trust means basically a Foundational Structure which creates the noble intentions to promote, and develop the scientific literature, such as promoting education, and offer medical support to the society and people. In India anyone can create trust with certain limitations. The Indian trust Act 1882 governs the right to establish the private trust in India. But this act is not applicable for Waqf, customary, personal law, religious etc. The public trust is usually governed by the state government with specific legislation.
According to the Indian Trusts Act, the purpose for forming a trust must be specifically for charitable purposes with the following objectives, They are :
- Education
- Health
- General charity
- Religion / Rural development
The main idea for the trust is to run for the common purposes for the individuals or the society.
WHAT ARE THE REQUIRED DOCUMENTS REQUIREMENTS FOR TRUST REGISTRATION ?
- For the registration of the Trust there should be a need for certain documents which is necessary and important for the process of registration.
- The respective stamp Values for the trust deed
- PAN card of the parties.
- Address and identity proof of the parties involved also with two witnesses.
- Address proof of the Trust resigned office.
- Photo copies of the parties and two witnesses.
- NOC (No Objection Certificate copies for maintaining trust )
- Income tax certificate of 12A registration and 80 G certificates for the Tax exemption for the trust.
HOW THE NAME OF THE TRUST SHOULD BE TAKEN AND APPROVED ?
In this step the name should be selected for the trust in which it complies with the certain provisions which are relevant to Emblem and names act, 1950. After the parties should select the appropriate name. The selected name should be examined and approved by the Ministry of Corporate affairs.
- The selected name should end with the word “trust”.
Eg : ABC Trust, Care India trust.
- The name should not violate any other trademark and the name should be unique originally.
WHAT ARE THE TYPES OF TRUSTS ?
The trust can be classified into three types based on the activities.
Public trust: the public trust is mainly focused on the benefits of the general public, largely. The public trust is governed by the government,and other institutions and individuals which mainly focuses on the public and the society. Eg : Charitable institutions, NGO, educational institutions are the example for the public trust.
Private trust : Basically the private trust is mainly focused on the closed group or the small group. The private limited trusts are governed by the Trust Act of 1882. It was created for specific purposes by the beneficiary. Eg: Private associations
Public cum Private trust : It is the combination of both the public and the private trust where the benefits should be of equal purpose for the public as well as the private persons the trust should act for a basic intention.
WHAT ARE THE PENALTIES AND LIABILITIES ?
The violation of the provisions in the trust deed incurs both the civil and the criminal compliances. If the parties such as trustor, trustee and the beneficiary should violate the guidelines , they are punished by Section 405 to Section 409 of IPC 1860. The provisions basically outline the criminal breach of the trust.
- FAILS TO PROVIDE RETURN OF INCOME : The trust should provide the Tax exemption certificate to the appropriate income tax officers. If the certificate is not provided for the tax evacuation, the trust should face the legal consequences. In case the certificate is not filed to the income tax department for the assessment year. The section 272BB of Income tax act should levy the penalty of Rs 10,000 for the act of the trust. Maintaining the trust and all the other activity by the trustee. So the trustee is liable for the disputes.
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