Overview of Trust Registration

Given below are the various advantages of trust registration in India:

1. To Involve in Charitable Undertakings

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.

2. Accessibility to Tax Exemptions

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

3. Provide Benefits to Financially Aggrieved Individuals

Registered trusts play a vital role in providing much-needed financial aid to the underprivileged and the masses through charitable activities.

4. Encounter Minimal Legal Hindrances

The Indian Trusts Act, 1882, offers comprehensive legal protection for trusts, safeguarding them from unnecessary claims that could risk their legal standing.

5. Ensures Legal Coverage for Family Wealth

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.

6. Prevent Probate Court

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.

7. Immigration/Emigration of Family

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:

1. Number of Persons: When forming the trust, it is required that there must be at least two or more persons involved.
2. Compliance with Indian Trusts Act, 1882: The trust must be formed in accordance with the provisions outlined in the Indian Trusts Act of 1882,ensuring compliance with the relevant legal framework.
3. Disqualification: It is essential that none of the parties involved in the trust formation are disqualified under any law currently in force in India, safeguarding the trust's legitimacy.
4. Alignment with Indian Laws: The objectives of the trust must not contravene any existing laws in force in India.
5. Fair Practices: The practices conducted by the trustee must be fair and just.
6. Adherence to Public Interest and Laws: The formation of the trust must not go against public interest or any other prevailing law.
7. Non-Injury to Persons: The trust activities must not cause harm to any individual.
8. Conformity to the Memorandum: The activities carried out by the trust must align with the objectives stated in the memorandum.
9. Properly Drafted Trust Deed: The Trust Deed must be accurately drafted, intending to represent the genuine interests of the parties forming the trust.
10. Valid Purposes: If the trust has more than two purposes, both objectives must be valid. If one purpose is valid while the other is invalid, the trust cannot be formed.

The registration process for a trust requires the following documents:

• Trust Deed containing the appropriate stamp duty.
• Two photographs of the individuals involved in the trust.
• PAN Card of the individuals associated with the trust.
• Address proof of the concerned individuals.
• Identification proof of the involved individuals.
• Verification from the partners involved.
• No Objection Certificate for utilising the premises.
• Any utility bill as proof of address.
• Address verification for the registered trust office.
• 12A and 80G Certificates issued by the relevant income tax authorities, enabling the eligibility for deductions.

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:

• Object Clause: Clearly reflect the purpose for which the trust was created and outline the allowed contributions, donations and subscriptions.
• Investments: Define guidelines for the proper administration and distribution of trust funds, including investments to generate extra income.

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.