Trust Registration in India

Last Updated at: Dec 23, 2020
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Trusts and charitable institutions will be able to renew their registrations by December 31, 2020 instead of the earlier deadline of August 31, the CBDT said in a statement recently. Further, new trusts will be able to register by October 1, 2020 instead of the earlier deadline of June 1, 2020. This relaxation was given owing to hardships caused by the COVID-19 pandemic.

 

Trust Registration is done for several purposes and is proved to be an effective channel for succession and property planning. In 1882, the Indian Trust Act has governed the Private Trust, which applies to entire India except for Jammu and Kashmir state and the Andaman and Nicobar Islands. Furthermore, this act does not apply to Hindu Undivided Family, Waqf, charitable funding, etc. The Indian Government have made some modification in the Income Tax Act in 2015 and emphasized on charitable purpose.

The introduction of ‘Trust’ is discovered from the ancient period when the humans were organizing Dharmashalas, educational institutions, medical institutions, planting trees, constructing water tanks, etc. but after the origin of the new era, the trust concept has been visible for many reasons. The word ‘Trust’ means transferring the property of the owner to another person of the third person benefit and the owner. The Trust is divided into two categories: Public and Private. The trust can be created by Hindu Undivided Family, Company, Association of individuals and all the people who are capable of the contract. The trustee can be the owner of the property or any person who is eligible for the contract.

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Taxation for Private Trust after Trust Registration

For the Private Trust, the taxation depends on the income scheme. As it is an independent organization, it is taxed individually. Income tax of the Trust is fixed in two situations. In this situation, the trustee will receive the income as a representative person on account of a beneficiary. The tax is applied to the total salary of the beneficiary. In a discretionary trust, the shares of the beneficiary are hidden as they are more beneficiary. The trustee will control the income of the trust. Therefore, trust income is calculated at the maximum marginal cost.

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Procedure for Trust Registration

It is very important to register the Trust legally. There are many legal formalities to follow for Trust registration. Hire a professional legal practitioner who helps to complete the trust registration process without making errors. The procedure to file the application for registration and the documents which are needed for the registration process is given below

  • Trust document should be drafted
  • Should contain names and address of all trustees
  • Owner should produce no-objection certificate

A trust document should be drafted. This document should have all the information regarding the trust. It should be printed on Rs.100 non-judicial stamp paper. This document should be signed by the trustee and witnesses in notary presence. The Trust document should include all the trustee names and addresses, number of trustees, rules, regulation and its objectives. The owner of the property should provide a no-objection certificate for the place where the trust office is situated.

The documents required for the Trust registration are Form 10G, Registration certificate, Trust PAN card copy, utility bill copy, NoC from the owner, Trust deed copy, bank passbook for the past three years and evidence of Progress Report and Welfare Activities.

Documents-required-for-Trust-Registration

Responsibilities of a Trustee after Trust Registration

The trustee is required to execute a trust, fulfil the objective and follow the directions given by the trust. The trustee must protect the title name of the trust by defending and maintaining a suit. Besides, the trustee must take reasonable and proper steps to safeguard the property and the trust’s name. The trustee should consider the property as his and should take reasonable care and maintain it. The trustee is required to keep in track of clear information and accurate account of the trust property. The trustee should be able to protect the property. If the property is perishable, it needs to be converted into a permanent or profitable property. The trustee can also ask the beneficiary to provide information related to the state of the property or proper account at all times.

The main combined purpose for the people to startup with charitable trust is to get involved in charitable activities and accruing some advantages for trustee, his or her heirs and successors. Another reason for starting charitable trust through Trust Registration is to avail tax exemption, as it is a non-profit organization. However, to enjoy these benefits, the Trust must have a legal registration under the Indian Trust Act and Federal laws.

For Application of 80G Certificate

To apply for this certificate, the following documents must be submitted:

1. Properly filled Form 10G;
2. Registration Certificate;
3. Copy of PAN card of trust;
4. Copy of utilities’ bill;
5. NOC from the landlord;
6. Books of accounts for the past three years;
7. Copy of Trust Deed;
8. Evidence of Welfare Activities/Progress Report.

Follow the above steps to register your trust so that you can run it without any legal allegation. Hire a professional attorney who can help in completing the trust registration process without any mistakes. You must be ready with the documents required for trust registration as mentioned above.

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Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.