The Indian Trusts Act is one of India’s most significant legislation. This statute governs and protects the interests of trusts in India
According to the Indian Trusts Act, a trust’s primary objective is to safeguard the interests of its beneficiaries. A trust may be established for any legitimate objective, including philanthropic or governmental goals. Registering a trust is mandatory. A trust may be established for personal objectives, such as income creation or estate planning.
A trustee (can be more than one) manages the trust’s business on behalf of beneficiaries.
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What is Trust?
A trust and its trustees are two legal entities under Indian law. Trustees manage the assets of the trust and enforce settler’s instructions. Trusts can also establish legal contracts between individuals and the trust and periodically report accountings to the beneficiaries of the trust’s assets.
The Indian Trust act 1882
The Indian Trusts Act of 1882 lays down the guidelines for establishing, administering, and dissolving trusts in India. The statute covers both domestic and international trusts.
A trust may be established for several purposes, such as business management, charity, or estate planning.
The Indian Trusts Act of 1882 also lays forth the guidelines for registration of trusts, trustees’ authority and responsibilities, their immunity from personal culpability, and the rights of trust beneficiaries.
Parties in a Trust
- Trustor- A trustor is a person who establishes a trust. The trustor is the owner
- Trustee- The term “trustee” refers to a person in charge of the trustor’s gifts of property
- Beneficiary- The individual with whom the trust is established. Beneficiary is a third party that the trustee and trustor may recognise.
Types of Trust under the Indian Trust Act, 1882
Private Limited Trust
The Indian Trust Act of 1882 governs private limited trusts. These trusts can perform specific tasks for members of the family, certain people, or close relatives.
Public Limited Trust
Public limited trusts are for religious, charitable, and educational reasons. The following two types of public trusts are most prevalent in India:
- Charitable Public Limited Trusts
- Religious Public Limited Trusts
Companies covered by Section 8 of the Companies Act of 2013
Section 8 of the Companies Act of 2013 covers all private limited companies. The trust aims to promote activities related to arts, education, crafts, science, and conservation.
What is a trust deed?
A trust deed is necessary for the trust registered under the Indian Trust Act, 1882, and is comparable to a tool for expressing trust. Among many other things, a trust deed should include the trustee clause, name clause, settler clause, general body member clause, and other rules and regulations.
The following are all guidelines for trust deed registration:
- A trust deed is stated on a stamp paper with required stamp duty
- The settlor’s most recent passport-size photo and proof of identity
- Trustees’ most recent passport-size photos and proof of identity
- Recent passport-size photos and two witnesses’ identity documents
- Each page of the trust deed must bear settlor’s signature
- Two witnesses
Process of Trust Registration
Choosing a name
The trust name should be unique and must not result in any violation.
Number of trustees
Another crucial point is to determine the number of trustees (at least 2).
A Draft Trust Deed
The trust deed is drafted after confirming the unique name and number of trustees
Trustees and the trust’s author must be present in the sub-registrar office along with two witnesses. A fully attested copy of the trust deed is essential, and the cost for trust registration should be paid
Obtain a PAN and TAN
After registering the trust deed, request the trust’s PAN and TAN, and open a bank account.
Advantages of trust registration
- In India, the government provides land to every trust
- A certificate to avail benefits of section 80 G
- Tax advantages
- White money for overcoming building restrictions
- Income tax/service benefits
- A Government-registered name is used by a registered trust under the trust act
Eligibility criteria for trust registration
- For registration, under the Indian Trust Act, a trust should include a minimum of two people.
- The objectives of the trust must not violate any Indian legal requirements
- The trustee’s actions in every matter must be reasonable
- Ensure that the activity of the trust does not harm anyone
- If any of the objectives for creating the Trust are invalid, the trust cannot be established
- The creation of a trust should not violate any public interest or other Indian law that is in effect.
Documents required for trust registration
- Reason for establishment of trust
- Name, age, address, and father’s name of the settler and trustees along with their profession, email address, title, and mobile number
- Number of trustees
- Address of the trust’s registered office
- Rules and regulations that the Trust is required to follow
- Name of the Trust as proposed
- Copy of the settlor’s and the trustee’s identification
- The most current passport-sized photographs of the settler and trustee
- At the time of Trust registration in India, settlers must be present with their original identification documents and two witnesses
- A self-attested copy of the settler’s photo ID, such as a driver’s licence, voter ID, Aadhar card, passport, or other photo ID
- A self-attested copy of each trustee’s identification, such as a voter ID, an Aadhar card, a passport, a driver’s licence, or a photo ID
- PAN card
- A no objection certificate (NOC), a certificate that the property owner has signed
- Any documentation that can prove the registered office of the trust
- Address proof, such as the most recent water, gas, phone, and electricity bills
Setting up a trust in India is highly recommended for people engaging in charitable activities for some tax advantages. However, registering the trust under the Indian Trust Act is essential. The restrictions for establishing such a company are notably looser than those for other registrants. However, laws laid down for the establishment of trusts should avoid problems.
If the trust is interested in receiving funds, it should first satisfy qualifying requirements. The trust should have a valid registered trust deed.