Trust Registration Process In India

Establishing a trust in India is a vital step toward promoting social welfare and charitable causes. Whether for educational, medical, or philanthropic purposes, trusts play a crucial role in serving society. However, to ensure their legal standing and smooth operation, it is essential to register them under the trust registration process as defined by various laws, including the Indian Trusts Act, 1882.

This guide will walk you through the trust registration process, covering key legal provisions, types of trusts, the necessary documents, step-by-step registration procedures, benefits, and challenges. By understanding the legal framework and requirements, individuals and organizations can seamlessly establish a trust while ensuring compliance with all necessary regulations. Whether you’re setting up a public, private, or charitable trust, this detailed guide will help you navigate the complexities of trust registration in India.

Understanding The Trust Registration Act

Trust is a type of business structure that an individual forms to promote worthy causes such as science, literature, etc. These entities are specially created with the purpose of providing services such as education, medical care, etc. to society.

Creating a trust in India is a significant step, and the Indian Trusts Act of 1882 serves as the foundation for this process. This Act lays out the ground rules for how trusts are formed, managed, and dissolved, ensuring clarity and legal soundness. It defines key players like trustees and beneficiaries, outlining their rights and responsibilities. Think of it as the guidebook for navigating the world of trusts, protecting the interests of everyone involved.

Explanation Of Key Laws Governing Trust Registration Process

The laws that govern the trust registration process are as follows:

Indian Trust Act, 1882

The provision is based on private trusts and trustees. It covers important provisions related to trusts such as definition, types of trust, objective, eligibility criteria for creating trusts, registration process for creating a trust, ways in which different types of trusts can be taxed, etc. The Act is applicable to the whole of our country India. However, it does not apply to property belonging to Waqf, mutual relations of undivided family members determined by any customary/charitable/religious/personal laws.

The Charitable Endowment Act, 1890

The provision outlines laws related to a trust formed through endowment. The Act applies to the administration and protection of trusts with endowment purposes. The Act ensures funds are utilised properly for charitable causes. It also highlights the appointment of trustees and audit of accounts & records.

Income Tax Act, 1961

The Income Tax Act contains provisions related to the tax implications of the trusts. As per Section 11 and Section 12 of the Income Tax Act, tax can get various types of income tax exemptions by fulfilling relevant criteria such as the trust should be registered as per relevant provisions of the Indian Trust Act, 1882, the trust has a valid PAN and other relevant documents, etc.

State-Specific Public Trust Act

Several states in India also have regulations that govern regulations related to trusts. The examples include Rajasthan Public Trust Act of 1959, Bombay Public Trust Act of 1950, etc. These Acts cover accounts, audits, registration, and administration of public details governing the regular functions of the administration of a Trust.

Participants In The Trust Formation Process

The process of trust formation has the following participants:

Settlor

The person who creates the trust is the settlor. They carry out the duty of transferring assets or property into the trust for the beneficiary’s benefit. They can set conditions related to the trust like how and when a beneficiary can receive an asset or property and revoke or modify the trust as needed.

Beneficiary

An entity or individual who receives benefits from the trust property is the beneficiary. Examples include any person, a non-profit entity, or a charitable organisation. Based on the terms and conditions mentioned in a trust deed, a beneficiary has the right to get income or principal from the trust.

Trust Property

Any asset or property held in a trust for the benefit of the beneficiaries is trust property. Examples are bonds, cash, real estate, stocks, or any other asset type eligible for transfer to a trust. A trustee manages such properties.

Types Of Trusts

An individual can create a trust for any lawful motive. The types of trusts in India are as follows:

Public Trusts

Such trusts are established to benefit the public as a whole. These entities are focused on providing charity, education, and religious services. Many provisions such as the Bombay Public Trust Act of 1950, the Charitable and Religious Trust Act of 1920, and the Religious Endowment Act of 1863 guide the governance of public trusts in India. Examples of such trusts include charitable and religious trusts.

Private Trusts

Whenever entities are formed to conduct activities for particular individuals, close associates, or families. The Trust Act of 1882 governs such trusts with beneficiaries closely related to the founders of the trust. One can register such trusts as per the provisions of the Registration Act, 1908.

Public Cum-Private Trust

Such trusts are formed for both public and private purposes. The beneficiaries of such trusts are the combination of both private and public individuals and can utilise the income for their benefit. Such a body is governed by the Trust Act of 1882.

Key Elements Of Trust Deed

The key elements of a trust deed are as follows:

1. Name & Address: Mentions name of the trust and office address as decided by the trustees.
2. Declaration: Comprises execution date of the trust, details of trust founders along with the sum for which the trust was settled and their acceptance.
3. Objective: The clause talks about the main purpose of registering a trust keeping in mind the public at large.
4. Constitution & Power of Board of Trustees: Board of Trustees are responsible for passing different resolutions and taking trust-related decisions where the Chairman presides over each meeting. Their powers include corpus donation receipt, and investment of funds for various purposes according to trust objectives.
5. Functions: Mention functions regarding management, administration, and other functions like the amount to be borrowed, agreements to be done with concerned parties, appointments within the trust, etc.
6. Duration: Mentions duration for which trust has been formed.
7. Indemnity to Trustees: The clause mentions a trustee shall not be liable for any bonafide act performed by the trustee to fulfil his duty to the trust.
8. Accounts: Mention accounts of the trust shall be maintained properly and shall be closed on 31st March of every financial year.
9. Dispute: The clause talks about situations arising while interpreting the deed based on its duties and functions.
10. Meetings: The clause details information related to meetings conducted such as notice of meeting, meeting period, quorum, voting, etc.
11. Dissolution: The section mentions a trustee or settlor shall not have any right over the funds and trust property in situations where a trust may get dissolved.
12. Witnesses: Mentions information related to witnesses of registration of the trust.

Eligibility Criteria For Registering Trust

A trust has to meet the following criteria to get registered:

• There should be two or more individuals to register a trust.
• A trust has to be established as per the provisions of the Indian Trust Act, of 1882.
• The trust deed must be drafted as per relevant regulations and highlight the interests of the Parties involved in registering a trust.
• The trustee should be a resident of India
• There should be no criminal cases against any of the involved parties.
• The trustees are required to carry out trust-related activities in a fair and just manner.

How To Apply For Trust Registration

Registering a trust typically involves drafting a trust deed, selecting trustees, defining the trust's objectives, compiling necessary documents, paying applicable fees, and submitting the application to the relevant registrar of trusts or charity commissioner in the respective state.

Step-by-Step Trust Registration Process

Go through the following steps to register a trust successfully:

Step 1: Choose a Trust Name

The parties involved in creating a trust should settle for an appropriate name complying with relevant provisions like the Emblems and Names Act of 1950, Trademark Act, Copyrights Act, etc.

Step 2: Decide Settlers Of the Trust

Decide upon persons who shall be responsible for acting as settlers of the trust. A minimum of two trustees is required for this purpose, and there is no restriction on maximum numbers.

Step 3: Draft MoA for the Trust

Draft a Memorandum of Association (MoA) outlining the objectives and purposes for which trust is being created. Make sure the goals highlighted in the MoA comply with the laws.

Step 4: Prepare Trust Deed

Draft the trust deed which is a legally binding document necessary for establishing a trust. The deed has to be presented before the registrar when the trust shall be getting registered.

Step 5: Submit the Trust Deed before Registrar

After you are done with drafting a trust deed, submit the same before a Registrar along with the necessary documents

Step 6: Obtain a certificate of Trust Registration

Once the documents are submitted, then reviewed, and the registrar is satisfied with their validity and compliance, the trust shall be registered after the registrar issues a registration certificate for the trust.

Drafting a legally sound trust deed is crucial. Consulting an expert trust lawyer can help ensure compliance with relevant laws.

List of Documents Required for Trust Registration

You need the following documents for the registration of a trust:

• Memorendum Of Association (MoA) of the trust.
• Two photographs belonging to the parties involved in the trust.
• PAN cards of the trustees.
• Address proof of the trustees.
• Identity proof of the trustees.
• Utility Bill of any type as proof of address.
• Address proof of the trust registered office.

Trust Registration Fees

The exact fees for registering a trust can vary from state to state depending on the local laws. The drafting of a trust deed involves stamp paper the value of which is a certain percentage of the total value of the trust's property. This percentage can vary from state to state. In many states, a fee of Rs 100 has to be paid for the registration of the trust. Additional fees of Rs 1000 for keeping a copy of the registered trust deed in person.

How To Check Trust Registration Online In India

The NGO Darpan Portal (https://ngodarpan.gov.in/ ) is a platform maintained by NITI Aayog that lists NGOs and trusts registered in India. You can search for the trust by name or registration number. If the trust is registered with the National Trust, which works for the welfare of persons, you can check their website for registration details: https://nationaltrust.nic.in/registration/.

Benefits For Registered Trusts

The following are the benefits of registering a trust in India:

Tax Exemption

The Income Tax Department offers many tax exemptions to the registered trusts in India. Since the trusts do not have the objective of generating profits, hence a trust with a registered deed are covered by many tax exemption benefits.

Advancement Of Non-Commercial Activities

A trust provides benefits to individuals from one’s assets by protecting the interests of beneficiaries and charities. For example, a trustee without possession of assets can gain from a trust.

Legal Remedies

The provisions of Trust Act 1882 provides protection to legal standings of a trust by ensuring no third party makes unnecessary claims. The remedy protects the trustee, settlor, and beneficiaries.

Probate Avoidance

A person can get in touch with a registered trust to transfer the assets of the heir without a proper will. A trust does not need any additional registration since it is a private agreement. It is possible to change ownership even if a will is unavailable with the help of registration of the trust.

Challenges In Trust Registration And Available Legal Remedies

One can face following challenges while registering a trust:

Finding the Right Authority

Registration of a trust is heavily dependent on state specific laws along with Trust Act, 1882. It might be the Charity Commissioner, the Registrar of Societies, or even the District Magistrate. Finding the right office can take a lot of time.

Complex Paperwork

While registering for a trust, one might need several documents such as carefully drafted trust deed, identity proofs, address proofs, and sometimes even No Objection Certificates. Gathering and organizing all this paperwork can be time-consuming and a little overwhelming.

Drafting the Trust Deed

The trust deed outlines the trust's objectives, its management, and how it will operate. It needs to be legally sound and comprehensive, and getting it wrong can cause problems down the line.

The available legal remedies to counter challenges in trust registration are:

Conduct Research

Research the specific requirements for your state, gather all the necessary information, and understand the process. This will help you be better prepared.

Careful Documentation

Ensure that all your documents are complete, accurate, and properly attested. Double-check everything before submitting your application.

Trust Registration Certificate Format

The basic format of a trust registration certificate are as follows:

TRUST REGISTRATION CERTIFICATE

[Name of Trust]
Registered Under [Trust Act, Year]

This is to certify that [Name of Trust], having its registered office at [Trust Address], has been duly registered as a Trust under the [Relevant Trust Act] on this [Date].

Trust Details:

• Trust Name: [Name of Trust]
• Trust Address: [Full Address]
• Registration Number: [Registration Number]
• Date of Registration: [Date]
• Trustees:
  1. [Trustee Name 1]
  2. [Trustee Name 2]
  3. [Trustee Name 3] (if applicable)

This certificate is issued as proof of the registration of the said Trust.

Issued on: [Date]

Seal/Stamp of the Authority
[Registrar Name]
[Designation]
[Office Address]

Conclusion

Registering a trust in India is a crucial step to ensure its legal validity and long-term sustainability. The trust registration process involves compliance with various legal provisions, submission of essential documents, and adherence to state-specific regulations. By understanding the key laws governing trusts, the roles of trustees and beneficiaries, and the significance of a well-drafted trust deed, individuals can successfully establish and manage a trust.

A properly registered trust not only enjoys tax exemptions and legal protection but also builds credibility and ensures smooth operations. While challenges such as complex paperwork and legal formalities may arise, following a structured approach and seeking professional guidance can simplify the process.

Whether you’re setting up a charitable, private, or public trust, a thorough understanding of the trust registration process will help you achieve your philanthropic and social objectives efficiently. Take the necessary steps today to create a legally sound trust that serves society while securing long-term benefits for all stakeholders.

FAQs

A few FAQs based in trust registration process are:

Q1. What is trust registration?

Trust registration is the legal process of formally recording a trust with the appropriate government authority. This process validates the trust's existence and ensures its compliance with legal requirements, making it a legally recognized entity.

Q2. How long does it take to register a trust?

The time it takes to register a trust varies depending on the state, the complexity of the trust deed, and the workload of the registering authority. It can generally take anywhere from a few weeks to several months.

Q3. How many members are required for trust registration?

The minimum number of trustees required for a private trust is generally two, although it can vary by state. Public trusts may have different requirements, often needing a larger number of trustees.

Q4. How to download a trust registration certificate?

If the trust registration records are available online in your state, you may be able to download the certificate from the relevant government website. Otherwise, you might need to apply for a certified copy from the registering office.

Q5. How to check a trust registration number?

Checking a trust registration number may be possible online through a state's charity commissioner website or a national portal like NGO Darpan, if the trust is registered there. Alternatively, contacting the registering office directly can help verify the number.

Q6. What is a trust registration certificate?

A trust registration certificate is an official document issued by the registering authority, serving as proof that the trust has been legally registered. It typically includes details like the trust's name, registration number, date of registration, and the names of the trustees.

Q7. What are the three types of trusts?

While there are various classifications, trusts are commonly categorized as private trusts (for specific individuals or families), public trusts (for charitable or religious purposes), and public-cum-private trusts (having elements of both). Each type has different regulations and requirements.

Q8. What is the validity of trust registration?

Once a trust is registered, it generally remains valid indefinitely unless it is dissolved according to the law or its own terms. However, some periodic compliance requirements, like filing annual reports, might apply.