A trust is based on a trusting relationship between two parties. One is the trustee, and the other is the trustee. The trustee acquires the right to hold property or title for the benefit of a third party. As per Section 3 of the Indian Trusts Act, 1880, the definition of trust is as under –
“Trust described as a duty attached to the ownership of property, and arises from a trust accepted or accepted by the owner, or by another, or for the benefit of another and the owner, or declared by him or her.”
Pre-requisite for the Trust registration
Private vs. Public Trust
Private trusts in India have regulated and governed by the Indian Trusts Act, 1882. On the other hand, people have confident that they are governed by the Bombay Public Trusts Act, 1950, except the state of Maharashtra.
Number of trustees
There is no set limit for the number of trustees but at least two trustees have always required at the time of trust registration. The trust deed should include arrangements for the administration of the trust, along with a strategy for assigning or removing members.
Trust registration cannot have done without the most important document known as a trust deed. It explains the reason behind the existence of the trust. The document also includes a list of its beneficiaries and describes the powers of the trustees. At least two witnesses have required at the time of the deed signing process.
Public trusts can enjoy the facilities provided by the government after the registration process. Public trusts are also eligible for tax exemptions.
Features of Trust
Trusts have registered using the name of the trust. This document contains all the information about the trust and have printed / written / typed on plain A4 size papers. With these papers you will get non-judicial stamp paper (which you can get from a notary). All trustees and witnesses must provide fingerprints and signatures on these papers. Overall, you will need the help of a notary to prepare the papers.
You may also need a No-Objection Certificate (NOC) from the property owner where the trust’s registered office fee is located. If you own a property, you don’t have to worry about NOC
The following elements must be mentioned in the trust deed document:
- Settler’s name and address (the settler is the person who establishes trust)
- Name and address of other trustees (s)
- Name of the trust
- There can be minimum and maximum trustees on your trust
- Address of the Registration Office of the Trust
- Objectives of the Trust
- Rules and regulations of the trust
You need at least two trustees (i.e. one colony and another person) to register a trust. You can determine the maximum number of trustees and this number must be mentioned in the trust deed. All trustees together are called the Board of Trustees. This board collectively manages the trust.
Unlike societies, in the case of trusts or some trustees may be related persons (e.g. they may be from the same family).
- All trusts are allowed to operate at the All India level
- What is specified in the trust deed is deferred. This means that the trust cannot be hurt
- Trustees are usually life members or their tenure is specified in the functions. The appointment of trustees does not involve an election process.
- The Board of Trustees may also have different designations for trustees. The general designation is chairman and managing trustee.
Trustees cannot receive any compensation from a trust fund. However, they can claim a reasonable return for the professional services rendered to the trust.
There is no difference between a trust and a foundation.
Profits earned by a trust (e.g. interest earned from a bank) cannot be divided among trustees.
Trust deeds can be amended by supplementary trust deeds.
The most important part of a trust deed that you should pay special attention to is the objectives of the trust. You should be as thorough as possible in writing the objectives of the trust so that you can function easily without any problems.
At the time of registration, only the settler and two witnesses are required to appear before the Deputy Registrar, under whose jurisdiction the registered office fee address comes. The Sub-Registrar will check the IDs of these people. The trust will then go to the deed counter where the data entry takes place. Finally, a photo of Settler and two witnesses will be taken.
Important points of Trust registration
- The income of the trust is exempt from income tax. To get this facility, after registration, you need to get a certificate from the income tax department. This certificate is called u / s 12A.
- Public charitable trusts are also exempt from tax on donations (i.e. donors do not have to pay tax on donations made to the trust). For this, you need to get an 80G certificate from the income tax department.
- Lawyers in general and practice CA can help you register a trust – but I think a lawyer is a better person if you need help creating a trust deed. C.A. Don’t know the harsh laughter of legal things.
- If you can write your own trust deed – and make sure you have done a good job – all you need is the help of a notary who will take your trust deed and prepare it for submission to the registrar.
- After registering the trust, to obtain 12A and 80G certifications, you may need to take the services of Practice CA. They charge a hefty fee for these services.
Foreign nationals or people convicted by a criminal court cannot be trustees of a trust. The government on Wednesday came out with the Tamil Nadu Public Trusts Act 2020 to regulate public trusts, including government registration, disqualification of trustees, and maintenance of accounts by trusts and control and control over the administration of trusts.
The law was passed following an order issued by the High Court on July 5, 2018, after which the government was asked to prepare a plan or guideline to form a supervisory panel for the proper functioning of the government or trust.