Overview of Trust Registration
The execution of the Trust deed can result in the creation of a trust, which is entirely online. The Trust deed is the first requirement in the Trust registration process. Before delving into the specifics of Trust Registration, it's important to understand what trust is.
What Does Trust Mean in an Indian Context?
The Indian Trust Act 1882, which governs trusts, governs the registration of trusts. The trust is a harmonisation in which the property is transferred to a trustee by the Trust's owner. The goal of transferring the property in this case is to benefit a third party. The trustor transfers the property to the trustee along with a proclamation that the property is to be held by the trustee for the benefit of the trust's beneficiaries.
To reap the benefits of a Trust, certain prerequisites must be met, one of which is the registration process. Trust Deeds must be formed on non-judicial stamp paper prior to registration. Every state has set its own stamp duty rate.
What Are the Advantages of Trust Registration?
The following are the advantages of Trust Registration: -
Participate in Charitable Activities
Charitable trusts are established with the common goal of engaging in charitable activities while collecting certain benefits for the donor, his heirs, and successors.
Tax Breaks for Registered Trusts
The other main reason for forming a registered trust is to benefit from tax breaks. Such charitable trusts are non-profit organisations, and in order to take advantage of all of these benefits, the charitable trust must have a legal entity.
Provides Assistance to the Poor
By carrying out charitable activities fairly, the registered trust benefits the poor and the general public.
Conformity with the Law
By registering the trust, compliance with the provisions of the Indian Trusts Act, 1882, will be maintained, directly protecting the Trust from any legal hindrance.
Family Wealth Preservation
Trusts can be used to own specific assets, such as land or a stake in a family-owned business, that would be inappropriate or impractical for a settlor to divide among individuals. The use of a trust enables such individuals to benefit from assets even though they do not own them. A trust will also aid in the preservation of the capital value of such assets for future generations.
Stay away from Probate Court
Because the legal title of the assets passes from the settlor to the Trustee when they are "settled," there is no change of ownership when the settlor dies, obviating the need for probate of a will in terms of trust assets.
Furthermore, Grants of Probate are public record, whereas a trust is a private agreement that does not need to be registered anywhere. The use of a trust can also avoid the economic hardship that a surviving spouse may face while waiting for probate to be granted.
When a person and his or her family relocate to another country, it is frequently the best/only time to establish a trust in order to avoid taxation in the destination country, thereby protecting the family wealth and providing flexibility in its organisation. Such an organisation necessitates detailed professional advice and direction.
Heirship by Force
Residents of countries with fixed legacy laws may be able to use trusts to benefit from the flexibility they provide in distributing a portion or all of their assets to beneficiaries who would otherwise be barred from benefiting under the laws of their country of residence. Such planning must be done with the assistance of legal experts in their country of residence/nationality.
Trusts can be very effective at lowering capital and income taxes. The trust may provide effective tax protection for the settlor, the beneficiaries, and the trust assets. Trusts are frequently used to mitigate or avoid inheritance tax in the settlor's jurisdiction, though this is obviously subject to appropriate tax advice being obtained.
Trusts can be very effective at lowering capital and income taxes. The trust may provide effective tax protection for the settlor, the beneficiaries, and the trust assets.
What are the Parties Involved in the Trust Registration Process?
Below mentioned parties are involved in the Trust Registration Process-
What Are the Different Kinds of Trusts?
In India, there are two types of trusts: private trusts and public trusts. While the Indian Trusts Act of 1882 governs private trusts, public trusts are divided into charitable and religious trusts. Some of the statutes for the enforcement of public trusts in India are the Charitable and Religious Trust Act, 1920, the Religious Endowments Act, 1863, the Charitable Endowments Act, 1890, and the Bombay Public Trust Act, 1950.
A private trust is a trust established for the benefit of one or more individuals who are, or will be, definitely ascertained within a specified time frame. The Indian Trusts Act of 1882 governs private trusts. These trusts can be established during one's lifetime or through a will.
A public trust is a trust established solely for the benefit of the general public. The following are key points for public trusts:
- Public trusts are primarily charitable or religious trusts that are governed by general law.
- The Indian Trusts Act regulations do not apply to Public Trusts.
- Public trusts, like private trusts, can be established inter vivos or by will.
Public-cum-Private Trusts are trusts in which a portion of the income may be used for public purposes and a portion may be distributed to a private person or persons.
What Documents Do I Need to Register a Trust?
The following documents are required for Trust Registration:
- Aadhaar Card, Voter ID, Passport, and Driving License are acceptable forms of identification for both the trustee and the trustee.
- Proof of Registered Office Address- Copy of Property/Utility Bills (Telephone, Water, Electricity Bill).
- In the case of rented property, a letter of authorization from the landlord is required.
- The Trust Deed's purpose.
- Details about the Trustee and the Settlor (Self-attested copy Id and Address Proof along with the information related to occupation).
- Trust Deed Based on Correct Stamp Value.
- Photographs of Trustee and settlor.
- PAN Card of Trustee and settlor.
- Total number of trustees.
- The Registered address of the trust.
- Proposed name of the trust.
- Rules and regulations to be strictly followed by the Trust.
- Presence of settlor and 2 witnesses at the time of registration of Trust.
In addition to that, the Trust deed contains the following information: -
What is the Trust Registration Procedure?
The following steps are involved in the Trust registration procedure–
Choose an Appropriate Name
The first step in registering the trust is to choose a suitable name for the trust. An applicant must consider whether the proposed name falls within the restricted list of names as defined by the Emblems and Names Act of 1950.
Creating a Trust Deed
The Trust deed must be drafted in order for the Trust to be registered. A trust deed is a document that contains all of the important registration information, and it must be presented to the Registrar at the time of registration.
Choosing Trust Settlers and Trustees
The next step is to choose the Trust's settlor and trustees. However, there is no stipulation regarding the number of settlers/authors. A Trust must also have a minimum of two trustees in order to be formed.
Preparing the Memorandum of Association
In order to register a trust, it is necessary to draught the Memorandum of Association, which serves as the Trust's charter.
Payment of the Required Fees
The next step is to pay the Trust registration fee.
Obtaining a Copy of the Trust Deed
After submitting the paperwork, the applicant can pick up a certified copy of the Trust Deed from the registrar's office within one week.
Trust Deed Submission to Registrar
Submit a certified copy of the Trust Deed to the local registrar after obtaining one. The Trust deed must be submitted with photocopies that have been properly attested.
Obtain a Certificate of Registration
After submitting the Trust Deed to the registrar, the registrar preserves the photocopy and returns the original registered copy to the applicant within seven business days, together with the certificate.
What Penalties Can Be Imposed for Breach of Trust Registration Compliance?
Penalties, Both Civil and Criminal
In the event of a breach of trust, the Beneficiary may face legal and criminal penalties. The Indian Penal Code 1860, Sections 405 to 409, deals with the specific provisions surrounding criminal breach of trust.
Number of Tax Deduction Account Application
The Trust or Institution should apply for a tax deduction account number in form 49B of the Income-Tax Rules to the Assessing Officer or the prescribed authority as soon as the trust or institution is registered, and quote the number on all challans for payment of sums under section 200, on all TDS certificates, and on all returns delivered under section 206. In the event that this is not done, section 272BB imposes a penalty of Rs. 10,000/-.
Failure To Provide an Income Return
The Act imposes a penalty for failure to file an income tax return. If the certificate for the tax deducted at source is not provided with the return of income due to the payer's failure to provide such certificate, the return of income will not be considered defective. However, the certificate must be delivered within two years of the conclusion of the evaluation year.
BIZ Advisors Process for Trust Registration
Please follow the steps outlined above to legally and securely incorporate a Trust Registration and reap the rewards of higher-quality charitable work. Our business specialists will be at your disposal to provide advice on Trust Registration and its compliance in order to ensure the smooth operation of your NGO in India. Professionals in the business world will help you plan smoothly and efficiently at the lowest possible cost, ensuring that the process is completed successfully.
To avoid many of the potential problems that lurk within Trust Registration and to fully comprehend the requirement, it is recommended that an attorney with “NGO experience” be hired. To begin the process, you will need to provide some basic information. Once all of the information is submitted and money is received, the Attorney will begin working on your request.
What is the purpose of Biz Advisors?
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Frequently Asked Questions
To obtain an exemption under section 11, a trust must be registered under section 12AB of the Income Tax Act of 1961.
A trust, unlike a corporation, is not a separate legal entity in the strictest sense. When the settlor gives any property to the trustee to be utilised and used for the benefit of the beneficiary, a trust is formed. A trust deed formalises this legal arrangement.