Trust Registration
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In India, trust registration is governed by the Indian Trust Act of 1882, simplifying the necessary legal processes. The Trust, essentially an organisational structure, involves the transfer of property from the Trust's owner to the designated Trustee. Its purpose lies in ensuring the equitable distribution of the Trustor's assets among specific beneficiaries, following the Trust deed's conditions.
Upon establishment, the Trustor appoints a trustee responsible for managing and eventually allocating the Trustor's assets to the chosen beneficiaries. In India, trust beneficiaries are typically heirs, family members or charitable organisations.
Given below are the various advantages of trust registration in India:
Trust registration enables individuals to set up charitable trusts to benefit both concerned beneficiaries and a chosen charity. This allows the use of nonessential assets like stocks or real estate to aid society through various charitable activities.
Registered trusts in India gain access to multiple tax exemptions provided by the Income-tax department. As the primary objective of a trust is not profit generation, they become eligible for various tax relaxations, ensuring better coverage for the settlor, beneficiaries and trust assets from stringent tax provisions
Registered trusts play a vital role in providing much-needed financial aid to the underprivileged and the masses through charitable activities.
The Indian Trusts Act, 1882, offers comprehensive legal protection for trusts, safeguarding them from unnecessary claims that could risk their legal standing.
Trusts are useful for allocating specific assets, such as land or interests in family entities, that might not be easily distributed among individuals by the trustor.
Trust registration can be used as a tool for transferring assets to heirs without the need for a Will. The legal title of the assets transfers to the trustee upon being "settled," eliminating the requirement for probate of a will for trust assets.
Establishing a trust can be beneficial when an individual and their family move to another country, as it can help avoid taxation in the destination country and protect family assets while ensuring flexibility in asset management.
The following is the eligibility criteria for trust registration:
The registration process for a trust requires the following documents:
Given below is the procedure for trust registration in India:
Step 1: Choose a Name for the Trust
Choose an appropriate name for the trust, ensuring it complies with the provisions of relevant acts like Trademarks, Copyrights Act and Intellectual Property Rights Act. Additionally, ensure that the name does not violate the Emblems and Names Act, 1950.
Step 2: Decide on Settlers of the Trust
Decide on the settlers of the trust, keeping in mind that there should be a minimum of two trustees for the trust's formation. The trustee cannot be the author and they must be a resident of India.
Step 3: Form Memorandum of Association for the Trust
Create a Memorandum of Association (MOA) for the trust, stating its purpose and objectives. Ensure that the objects mentioned in the MOA are legal and align with the trust's intended operations.
Step 4: Draft the Trust Deed
Prepare a legitimate trust deed, which serves as an important document for forming the trust. The trust deed must be submitted to the companies' registrar during the trust formation process. While drafting the trust deed, consider the following aspects:
Step 5: Submit the Deed to the Registrar
Once the trust deed has been drafted, it needs to be submitted to the registrar. The trustor, trustee and beneficiary are involved parties in drafting the deed. The trust deed operates similarly to articles of association in a company, containing all the bye-laws and relevant information. Ensure the trust deed is executed on a stamp paper according to the property value.
Step 6: Obtain Certificate of Trust Registration
Upon verifying all the documents, the registrar will proceed with trust registration if they are in order. The registrar will issue the trust registration certificate, which needs to be kept with the trustee and trustor. After this, the respective bank account can be opened for the trust.
Startupfino is a company that specialises in offering complete services for Trust Registration and Compliances. We can aid with everything from providing advice in the beginning phase to ensuring that you meet all the necessary requirements and also keeping your trust in good legal standing.
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