Wednesday, June 24, 2015

How to register a Trust ( Procedure and Steps )

How to register a Trust ( Full Procedure and Steps to register a Trust )
Full Article on Trust

Trust deed Info 
What is a Trust ? Types of Trust ? About Indian Trust Act

Trust :  (Law) "a trust setup" - An arrangement whereby a person (a trustee) holds property as its nominal owner for the good of one or more beneficiaries.

Types of Trust: A Trust can either be a private trust or a public charitable trust depends upon the nature of a trust and its purposes.

Private Trust : Private trusts are governed by the Indian Trusts Act (1882) and are used for private purposes, such as running a private estate or institution. Privates trusts are not given any tax benefits by the Government of India.

Public Trust:  If you want to do some charitable work for public –you can set up a public charitable trust. India does not have a national level law to govern charitable trusts. However, a few of the states have enacted Public Charitable Trusts Act (Like Bombay Public Trusts Act, 1950)

Trust Deed:  Trusts are registered using a document called TRUST DEED. This document contains all the information about the Trust and is printed/written/typed on plain A4 size papers. Along with these papers you would need to attach a Rs. 100 Non-Judicial stamp paper (which you can get from a notary).

Trust Deed in detail: All the Trustees and witnesses will have to give thumb impressions and signatures on these papers. All in all, you will need help of a notary to prepare the papers. You may also need a No-Objection Certificate (NOC) from the owner of the property where the registered office of the trust is to be situated. If you’re the owner of the property, then you don’t need to worry about NOC

Following elements must be mentioned in the Trust Deed document:
Name and address of the Settler (Settler is the person who is setting up trust) Name(s) and address(es) of the other trustees
Name of the trust Minimum and maximum number of trustees your trust can have Address of the registered office of the trust Objectives of the trust Rules and Regulations of the trust

Minimum Trustees | Board of Trustees : For registering a trust you need minimum of 2 trustees (i.e. one settler and another person). You can decide the maximum number of trustees and this number must be mentioned in the trust deed. All the trustees together are called Board of Trustees.

This board collectively governs the trust. Unlike societies, in case of trusts all or some of the trustees can be related persons (i.e. they may belong to the same family)

All the trusts are allowed to work on all India level Trusts are irrevocable –unless it is mentioned in the trust deed. This means that the trust cannot be wound up Trustees are usually life-long members or their tenure is specified in the deed.

Electoral process is not involved in the appointment of trustees.
Board of Trustees can also have various designations for trustees.
Common designations are Chairperson and Managing Trustee Trustees cannot draw any remuneration from the trust fund. However, they may take reasonable compensation for the professional services they provide to the Trust.

Profits earned by the Trust (e.g. interest gained from bank) cannot be distributed among the trustees. Trust Deed can be amended through a Supplementary Trust Deed. Most important part of the Trust Deed that you should pay special attention to is objectives of the trust. You should be as thorough as possible in writing down trust objectives so that you can function smoothly without any problems. At the time of registration, only the Settlor and two witnesses are required to be present in front of the Sub-registrar under whose jurisdiction the registered office address comes. Sub-registrar will check IDs of these people. After that the Trust Deed will go to the counter where data entry takes place. In the end, Settlor and two witnesses will be photographed.

You will need to pay a fee of Rs. 1100 for this process. Of this amount, Rs. 100 will be the registration fee and Rs. 1000 will be the charges of keeping a copy of the Trust Deed with the sub-registrar. After about one week of submitting the papers, you can go back to the registrar’s office to receive a certified copy of the Trust Deed.

Trust Registration: Other Important Points :
Trust income is exempted from income tax. But to avail this facility, after registration, you need to acquire a certificate from the Income Tax Department. This certificate is called u/s 12A Donations to the public charitable trusts are also exempted from tax (i.e. the donor will not have to pay tax on the amount he donates to the trust). For this, you need to acquire 80G certificate from Income Tax Department. Usually lawyers and practising CAs can help you in registration of trust –but I guess a lawyer is better person if you need help in formulating your Trust Deed. CAs don’t know the nitty-gritty of legal stuff. If you can write your own trust deed –and sure that you have done a good job –then all you need is the help of a notary who will take your Trust Deed and prepare it for presentation before the Registrar. After registration of the Trust, for acquiring 12A and 80G certificates, you may need to take services of a practising CA. They charge hefty fee for these services.

TDS on bank deposit in the name of a Trust
Even if a Trust/ NGO provides the Bank with sec. 12A registration, tax returns and balance sheet etc., Banks are mandated to follow statutory provisions. Hence, it will not work. Only option is obtaining certificate low/ no deduction of tax under section 197.

In brief Before you register your trust you will need to decide the following points:
i) Name of the trust should be decided
ii) Address of the trust
iii) Objects of the trust (charitable or Religious)
iv) One settler of the trust
v) Two trustees of the trust
vi) Property of the trust-movable or immovable property (normally a small amount of cash/cheque is given to be the initial property of the trust, in order to save on the stamp duty).

Prepare a Trust Deed on stamp paper of the requisite value (8% of the value of property of the trust in Delhi. The rate varies from state to state)

Requirement for registration of Trust Deed with the Local Registrar under the Indian Trusts Act, 1882:
i) Trust Deed on stamp paper of requisite value (as stated on point no.2 above)
ii) One passport size photograph & copy of the proof of identity of the settler
iii) One passport size photograph & copy of the proof of identity of each of the two trustees.
iv) One passport size photograph & copy of the proof of identity of each of the two witnesses.
v) Signature of settler on all the pages of the Trust Deed
vi) Witness by two persons on the Trust Deed.

Go to the local registrar & submit the Trust Deed, along with one Photocopy, for registration. The photocopy of the Deed should also contain the signature of settler on all the pages. At the time of registration, the settler & two witnesses are required to be personally present, along with their identity proof in the original.

The Registrar retains the photocopy & returns the original registered copy of the Trust Deed.


Sunil Kumar said...

12AA registered trusts are not tax exempted. They have some exemptions u/s 13 of the IT Act ie. mainly for receiving donations, claiming of capital expenditures, application of income and accumulation. There is no special exemption from other normal provisions of the Act, they have exemptions specified u/s 13 only

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