What is Public Trust?
Public trust is a trust where the beneficiaries are the public at large, and it undertakes the charitable activity in the way of relief of the poor, education, medical relief, and any other services of general public utility.
The purpose of the public charitable trust is to benefit the general public and none of the private individuals or associations should be personally benefited. And also it should cater to all public irrespective of any caste, creed, or religion.
The public trust can be classified into charitable and religious trust, abiding by the following Acts.Charitable and Religious Trust Act, 1920, Religious Endowments Act, 1863 Charitable Endowments Act, 1890 Societies Registration Act, 1860 Bombay Public trust Act, 1950
Besides the aforementioned laws, certain other related acts are the Transfer of Property Act, 1882, Registration Act, 1908 Indian contract Act, 1872 Income tax act, 1961
Benefits of Public TrustPublic trust is more permanent than a private trust. Income to a certain extent is deemed to have been applied for charitable or religious purposes in India, either wholly or partly, charitable or the religious trust would be exempt from tax payment, provided that the Trust is registered under section 12AA of the Income Tax Act, 1961. Public charitable trust has legal status because it can be registered in a state while in most cases private trust is not required to be registered, other than when there is a transfer of immovable property, a certain amount of equity assets, etc. Public charitable trusts have the option of amalgamation/merging with another public charitable trust with similar subjects that require prior approval from the respective state laws as applicable. A trust can not be easily dissolved, although a new provision has been implemented allowing dissolution, it needs fair reasons to be submitted to the charity commissioner's office, and it has large income tax obligations such as a tax on deferred income under section 115TD of the Income Tax Act, 1961.
Checklist requirements for Public Trust
General:When there are any changes related to immovable property under schedule IIIA, it must be intimated to the charity commissioner within 90 days of the change. Similarly, prior permission from charity commissioner is required if
The trust accounts balance sheet needs to be prepared under schedule VIII and the income & expenditure account details in schedule IX. The trust account needs to be audited if the annual income exceeds Rs 15,000. The audit must be done within 6 months from the closing of the accounting year and it should be submitted with the charity commissioner within 2 weeks of the audit. Any trust exempted from the audit should file details of income in schedule IX-A and the expenditure details in schedule IX-B within 3 months from the closure of the accounting year. All assets purchased must be in the name of associations
- Any further investment is made on immovable property,
- A sale, exchange, a gift of any immovable property
- In the case of non-agricultural land or building, a lease period exceeding 3 years.
- In the case of agricultural land, a lease period exceeding 10 years.
Foreign Contributions (FC):The received Foreign Contribution (FC) must be deposited only in the designated FC bank account. The FC will be treated as Corpus donation only if the supporting written statement of the donor is present. Every association must maintain a separate set of accounts or records about the FC received and utilized. The Trust must keep all the records related to FC, concerning The details like the name of the donors, their location, and the purpose of receiving. The interest earned on FC must be invested in any trust activities or projects. All account statements, Annual returns, bank statements from the designated FC account must be preserved for a minimum of six years. If the FC received is above Rs 1 crore in a financial year, then it is required to place the one-year summary data on both receipts and expenditure of the FC. All audit report must be duly certified by the Chartered Accountant (CA) The filing of the report is mandatory even if no FC was received during a financial year.
Sale of public trust property:The public trust property is not the private property of the trustees and cannot be regarded as private property or disposed of as such. The property is owned by the trustees only to the benefit of the trust's beneficiaries and thus the trustee’s act in a fiduciary capacity. The trust property is not the trustees' personal property and as the custodian of public trust, the charity commissioner will ensure the process. The Charity Commissioner shall be empowered to ensure that the trust property is not alienated unless the alienation is in the trust's interest and the Charity Commissioner is therefore required to ensure that the trust earns nothing less than the full market price of the property. Under Section 36 the power to give lawful direction is very broad. Section 36 itself imposes fetters on the powers of the trustees, and the Charity Commissioner, who is the guardian of the trust, controls and oversees the activity of alienating the trust property. It is for the trustees to decide to whom they should sell the property. The Charity Commissioner is empowered only for refusing sanction to a particular sale. He cannot influence the sale or require the trustees to sell the property to such third parties. Only if the charity commissioner considers, that the sale proposed by the trustees against the interest of the trust he could decline sanction”.
Public Trust Registration Process:
Determine the Appropriate Name for the Trust:
This is the first step towards Trust registration. In addition, the name so suggested does not fall within the restricted list of names under the Emblems and Names Act, 1950.
Select the Settlers/ Authors and Trustees of the Trust:
No specified provision is made regarding the number of settlers/authors. In most cases, however, there is usually one author. Further, the maximum number of trustees is not limited. But the establishment of a Trust needs a minimum of two trustees. Usually, the author cannot be the trustee. But he/she must be a resident of India.
Draft the Memorandum of Association (MOA) and Trust Deed:
A trust deed is legal evidence of the existence of your trust and includes your trust's rules and regulations. This deed also includes the trustees' bylaws about changes, removals, or addition. On the other hand, the Memorandum Of Association (MOA) represents the trust's charter. This determines the trustor's relationship with the trustees and sets out the objective of a trust. Such a document would contain all the members' names, addresses, and occupations, along with their signatures.
Submit the Trust Deed with The Registrar:
After obtaining a certified copy of the Trust Deed, submit that deed along with properly attested photocopies with the local registrar. Moreover, the settler will place his signatures on each page of the Trust Deed photocopy. It is also mandatory for the settlers and two other witnesses to be physically present at the time of registration along with their proof of identification.
Obtain the Registration Certificate:
The registrar holds the photocopy, after the Trust Deed is filed with him/her and returns the original signed copy of the Trust Deed. Then, after completing all the formalities, the certificate of registration will be given within seven working days.
Documents Required at the Time of Public Trust Registration:
The stamp paper value will be a certain percentage of the total value of the Trust’s property. Furthermore, this percentage value varies from state to state. After submitting the required documents, you can obtain a certified copy of the Trust Deed within one week from the registrar’s office.Trust Deed Self-certified copy of identity proof of the settler (passport, voter ID, Aadhaar card, driving license or any such photo ID) Self-certified copy of the identity proof of each trustee (passport, voter ID, driving license, Aadhaar card, or any such photo ID) Address proof of the registered office of the trust (registration certificate or electricity/water bill) PAN card A non-Objection certificate signed by the landowner Preparation of Trust Deed on a Stamp Paper
FAQs on Public Trust
Yes. Charitable/Religious trusts can involve in business activities but such activities must be incidental to the attainment of the main object, and separate account books have to be maintained for such businesses.
No. If any trust has enjoyed the amount spent on the acquisition of assets, as the income of the trust, then on such assets no depreciation will be allowed.
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