Trust Registration in India
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Trust Registration in India
Trust registration in India is the process by which the trustor or trustee (a person or an organization) registers the trust deed with its jurisdiction. Registering the trust deed ensures that the trust is recognized as a legal entity and provides protection to all assets held in trust, offering various benefits.
What Is a Trust?
A trust is a legal entity created when a person, the Trustor or Settlor, transfers property to another person, the Trustee, for the benefit of a third party, the Beneficiary. The trustee is responsible for managing and protecting the property for the beneficiary’s benefit. The trustor can also appoint someone, the Protector, to manage the trust and protect the beneficiary’s interests.
Contents of Trust Deed
The trust deed is the most important document for forming the trust as it lays down the whole framework for it. It should include the following:
- The name of the trust
- The date on which the trust is created
- The name and address of the trustee
- The name and address of the protector, if any
- The name and addresses of the beneficiary or beneficiaries
- The purpose of the trust
- The property to be held in trust
- Any restrictions on the use of the property
- The duration of the trust, if any
- Quorum of the Board – their terms, tenure, and qualifications
- Appointment or Termination or Resignation of Trustees
- Functions and powers of the Trustees
- Other important matters
Registering a trust in India provides the following benefits:
Protection of Trust Property: Once the property is registered under a trust, it is protected from being misused by anyone, including the trustees, for personal gains. No third party can make claims on a trust property that can affect the trust’s legal standing.
Tax Benefits: Registered trusts can avail many tax benefits under the Income Tax Act. Wealth tax is also relaxed on the trust property, thus removing the burden of capital and income tax. This ensures more benefits to the benefactors.
Legal Entity Status: The trust is a legal entity and can sue and be sued in its own name.
Benefits People in Need: Setting up a trust can help people who need it, whether it be a sole benefactor or for a charitable purpose. It is one form of NGO that can be set up to provide help to struggling masses.
No Need for Probate of Will: When a property is transferred through a will to the heir, there is a need for probate of will by the court. This can take a lot of time and cause adversity to the heir or the surviving spouse. On the other hand, a registered trust can support them from day one without any need for legal procedures.
Speedy Execution of Documents: Registration of the trust deed ensures that all documents related to the trust are executed quickly and without delays.
Types of Trust in India
There are two types of trusts in India:
Public Trust: Created for the benefit of the public at large. It can be for charitable activities and can focus on different aspects like education, medical support, or religious purposes.
Private Trust: Established for the benefit of specific individuals or organizations. These do not involve charitable activities but are for the benefit of one or more benefactors known to the trustor. The private trust registration and functioning should align with the provisions laid down in the Indian Trusts Act, 1882.
Any person or organization can register a trust in India. The following components are essential for trust registration:
- The intention of the trustor to create a trust should be clear.
- The trust must be for a lawful purpose.
- The trustee must be competent to manage and administer the trust.
- The trust deed should be properly executed.
- The trust property should be clearly identified.
The documents required for trust registration in India are:
- Trust Deed: The document that sets out the terms and conditions of the trust. It must be properly executed by the trustor and trustee. It should be on a stamp paper of appropriate value.
- Declaration of Trust: This document declares that the trust is valid and has been created for a lawful purpose. It must be signed by the trustor and trustee.
- Registration Form: This form must be filled in and submitted to the Registrar of Trusts along with the other documents.
- Copy of the Aadhaar Card or Passport of the Trustor: Required for identification purposes.
- Copy of PAN Card of the Trustee: Required for identification purposes.
- Registered Office Proof: Utility bills or certificate of the property has to be submitted as the address proof for the registered office address. If this is a rented place, then a NOC from the landlord and rent agreement is also required.
Apart from this, two witnesses are required for executing the trust deed.
Society Registration
A group of at least seven people can form a society. Businesses, foreigners, and other registered societies, in addition to Indian citizens, can apply for the society’s Memorandum of Association.
Similar to partnership firms, societies can be either unregistered or registered. However, only registered societies can own property and file lawsuits.
State governments are responsible for society registration. Therefore, the application for registration must be submitted to the specific authority in the state where the society’s registered office is located.
For registration, the founding members must agree on the society’s name, draft the memorandum, and establish the society’s rules and regulations.
The Naming Process
When deciding on a name for a society, it is important to remember that the Society Act of 1860 prohibits using a name that is the same or similar to one already registered. Additionally, the suggested name must not indicate any backing from the state government or the Indian government, nor should it violate the Emblems and Names Act, 1950.
Memorandum of Association
Every founding member must sign the society’s Memorandum of Association and Rules & Regulations, witnessed by a Gazetted Officer, Notary Public, Chartered Accountant, Oath Commissioner, Advocate, Magistrate first-class, or Chartered Accountant with their authorized stamping and detailed location.
The memorandum must include the society’s name and aim. It also contains details about the society’s members, such as their names, locations, titles, and occupations. For registration, the following documents must be prepared, signed, and submitted:
- A cover letter signed by all founding members requesting society registration.
- A duplicate of the society’s Memorandum of Association, along with a certified copy.
- A duplicate of the society’s Rules and Regulations, officially signed by all founding members.
- Address proof for the society’s registered office and a no-objection certificate (NOC) from the property owner.
- An affidavit signed by the society’s secretary or president stating the relationship between subscribers.
- Minutes of the meeting discussing the society’s registration and distribution of necessary documents.
Purpose of Society Registration
A society can be formed to advance fine arts, science, literature, or disseminate practical knowledge or charity political education goals. According to section 20 of the Society Act, 1860, a society registration can fulfill the following purposes:
- Promotion of fine arts.
- Dissemination of political education.
- Assistance to a charitable cause.
- Promotion of science and literature.
- Establishment of military orphan funds.
- Foundation or upkeep of galleries or public museums.
- Foundation or upkeep of reading rooms or libraries.
- Promotion, dissemination, or teaching of valuable knowledge.
- Collections of natural history.
- Collections of mechanical and philosophical inventions, designs, or instruments.
The president of the proposed society must sign a declaration that they are ready and capable of holding the position.
All preceding documents must be submitted in two copies to the Registrar of Societies, along with the required fees. Upon receiving the application, the registrar will sign the first copy and return it while keeping the second copy for approval. The registrar will issue an Incorporation Certificate after properly verifying the documents and assigning a registration number.
The signed Rules & Regulations and the Memorandum should be filed with the concerned society or state registrar with the fee. The registrar will certify that the society is registered if satisfied with the registration application.
