Trust Registration in India

Trusts are created when the settler of the property transfers property or provides benefits for the welfare of beneficiaries or for the usage of public purposes. A Trust formed with the aim to utilise the assets of the Trust to attain well being of public at large and promote a charitable cause is called a Public Charitable trust. Such trust do not have a fixed beneficiary, but the public in large, generally demarcated with common trait. E.g. for a Public trust located in a city the beneficiary may be the illiterate kids in the slums of the city.

The Major elements of the Trust is summarised below

• Author or Settler: One who forms the trust and transfers under irrevocable arrangement the property and its future benefits to the trust.
• Trustee: A body of Individuals who undertake the management and safekeeping of Trust and its property.
• Beneficiary: People who will benefit from the trust.
• Asset or property: of the trust
• Objective: of the Trust
• Trust Deed: defining all relationships, responsibilities, rights, terms and conditions.

80G Registration with Income Tax  for a Charitable Trust

Donations made to a Charitable Trust registered under section 80G are permissible for 50% deduction from the taxable income of the donation made for such a person or an organisation making the donation.

e.g. If a Person makes a donation of Rs. 10000 to an organization with 80G registration then the person can avail Rs. 5000 as deduction from his/her taxable income. Which encourages people to make more donation with 80G registered Organisation.

80G is a onetime registration with lifetime validity.

How to Register for 80G:-

• The application in form 10G is to be made along with required documents to the Income Tax commissioner who has jurisdiction over such an organization.
• Income Tax Officer verify and do inspection before grant.

12A Registration with Income Tax  for a Charitable Trust 

Section 11 and 12 of the Income- Tax Act 1961 are the most important sections of Income tax for Religious and Charitable trusts. The taxation of trusts formed with the objective of providing relief to the underprivileged, work for environment, general public benefit, religious purpose, etc fall under this section. The section defines what part of Income of such trust is taxable and what is exempt. The Income can be derived from capital gain from the assets of the Trust, its activities, or from donations.

Section 12AA of the new Income Tax act defines how a trust can register under these sections. An application is to be made using form 10A along with relevant documents to the Income Tax Commissioner. This is one time registration and to avail Tax exemption, NGO needs to register under section 12A.

How to Register for 12A:-

• The application in form 10A is to be made along with required documents to the Income Tax commissioner who has jurisdiction over such an organization.
• Income Tax Officer verify and do inspection before grant.

A Trust Deed is an essential instrument of a Trust. Though it is non mandatory but desirable as it is enforceable by law. A Trust Deed become must when there is a property involved, so as to provide a prima facie evidence of the existence of the trust  

The Trust Deed shall be prepared on a stamp paper whose value should be of certain percentage of the total value of Trust’s property. This percentage varies from state to state, for example, in Delhi this value is 8%.

The elements of that Trust deed which should be present in it are:- 

• Name and address of the Settler/ Author of the Trust.
• Names and addresses of the other trustees.
• Name of the trust.
• Minimum and maximum number of trustees. Minimum number is two while there is no limit for Maximum. But you must determine the maximum number your Trust can have. All the trustees together collectively govern the trust and are called Board of Trustees.
• Address of the registered office of the trust.
• Purpose behind formation of the Trust.
• Objectives of the trust.
• Rules and Regulations of the trust.
• Information about the intended Bank account: which bank and branch you shall open a bank account with.
• Tenure of the Trustees must be specified in the deed. It is not necessary to involve Electoral process in the appointment of trustees.
• Board of Trustees can also have various designations for trustees like Chairperson and Managing Trustee.
• Determine these posts and the responsibilities of each of these in the Trust deed.
• Though Trustees cannot draw any remuneration from the trust fund but they are eligible to receive compensation for the professional services they provide to the Trust. Determine this in the Trust deed.
• Date of execution of the Trust Deed.
• Details of the Trust Fund thus set up by the Settler and the movable immovable property included in the Trust Fund. Also contains information about the sources and activities through which income shall be earned and deposited in the Trust fund.
• Ways and plan in which the income shall be dispersed among beneficiaries or used in executing programs/ projects for their welfare.

In case of any changes in Trust Deed, includes chances of regisrtered office, trustees, objects, a new deed is need to be prepared and register in the Registrar Office within the time limit of such chagnes taken place.