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Trust Registration in India is a process by which the trustor or trustee (a person or an organisation) registers the trust deed with its jurisdiction. The registration of the trust deed ensures that the trust is recognized as a legal entity and provides protection to all assets held in trust. It also offers various benefits.
What Is a Trust?
A trust is a legal entity that is created when a person, the Trustor or the Settler, 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 benefit of the beneficiary. The trustor can also appoint someone, the Protector, to manage the trust and protect the interests of the beneficiary.
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 members Trustees
- Other important matters
Benefits of Trust Registration in India
When trust is registered in India, it enjoys the following benefits:
1. Protection of Trust Property - Once the property is registered under a trust, it is protected from being misused by anyone including the trustees for the purpose of personal gains. No third party can make claims on a trust property that can affect the trust’s legal standing.
2. 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.
3. Legal Entity Status - The trust is a legal entity and can sue and be sued in its own name.
4. Benefits people in need - Setting up a trust can help people who need it, be it a sole benefactor or for a charitable purpose. It is one form of NGO that can be set up for providing help to the struggling masses.
5. 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 1 without any need for legal procedures.
6. Speedy Execution of Documents - Registration of the trust deed ensures that all documents related to the trust are executed quickly and without any delays.
Types of Trust in India
There are two types of trusts in India:
- Public trust
- Private trust
Public trust is a trust that is 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.
A private trust is a trust that is established for the benefit of specific individuals or organisations. These do not involve charitable activities, rather they are for the benefit of one or more benefactors known to the trustor. The private trust registration and functioning should be in line with the provisions laid down in the Indian Trusts Act, 1882.
Eligibility for Trust Registration
Any person or organisation 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
Documents Required for Online Trust Registration
The documents required for trust registration in India are:
- Trust Deed - This is 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 is used to declare 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 - This is required for identification purposes.
- Copy of PAN Card of the Trustee - This is 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.
Process of Registering Trust in India
The trust registration online process in India is simple and easy, once the trust documents are complete. However, visiting the registrar office is mandatory. Here is the detailed procedure:
Step 1: Getting Things Together
The first step is to get the following things together:
You have to pick a name to register your trust. Make sure that it isn’t in violation of the Emblems and Names Act and isn’t identical or similar to existing trademarks.
Registered office address
One settler, two trustees and two witnesses
Properties and the objects of the trust
Step 2: Drafting Trust Deed
This is the most crucial part of the trust registration. A trust deed should be drafted on a stamp paper of certain value, depending on state laws.
From the inception of the trust to its dissolution, everything must be taken into account while drafting a trust deed. All the above-mentioned content should be included in the deed and it should be laid down in such a way that it cannot be interpreted in a wicked way that defeats the purpose of the trust.
It is highly recommended that you get professionals to draft the trust deed for you.
Step 3: Certified Copy of Trust Deed
Once drafted the trust deed needs to be executed in the presence of two witnesses. Then the self-attested identity proof and passport size photos of the trustor (the settlor), trustees, and the witnesses should be submitted along with the deed and the fees to the sub-registrar to get a certified copy of the trust deed.
Step 4: Registration of Trust
Finally, the certified copy of the trust should be submitted by the trustor (accompanied by the witnesses) to the local registrar. They will review the documents and will issue a Trust Registration Certificate. The trust deed and all other documents must be stamped with the Registrar's seal.
The trust registration fees vary based on the state you are from as governing of trusts are governed by state laws.
Penalties of Violating Trust Registration Rules
In case of violation of laws related to trust, there can be both civil and criminal actions taken against the violator. IPC Section 405 to 409 lays down the consequences of a criminal breach of trust.
Trust is expected to avail a Tax Deduction Account Number soon after its registration. For this, they have to make an official request to the Assessing Officer. Failure of this can lead to a penalty of ₹10,000.
The following compliances have to be done for a registered trust:
Getting a PAN card
Maintaining books and accounts
Filing annual IT returns
In case the trust carries out any profitable activities, then:
Obtaining necessary licences like Shop and Establishment licence
Professional tax registration
Things to Consider Before Registering a Trust
While trusts are easy to set up and manage, you need to consider the following things before setting them up:
It is a long-term commitment, so make sure you are confident about the purpose for which you are creating the trust.
While the deed and the laws protect the trust property and the functions of the trust, you still need to be prudent when it comes to choosing a trustee or appointing the Trust Board.
Consider the possible complications and decide on how it will be dealt with like removal of a trustee, changes in the terms of the trust deed, or winding up of the trust. These should be laid down clearly on the trust deed as well.
Why - Choosing eAuditor Office for Trust Registration
When it comes to registeration of a trust in India, eAuditor Office is the best choice for a variety of reasons:
- eAuditor Office is an authorised Trust Registration Agency.
- eAuditor Office has a team of qualified and experienced professionals who will guide you through the entire trust registration process.
- eAuditor Office offers competitive prices and excellent customer service.
There is no compulsory registration of trusts in India. However, trusts must be registered to enjoy certain benefits, such as protection under the law.
There are several ways in which an NGO can be registered in India. Ways to register an NGO include: 1. Registering as a Section 8 Company 2. Registering as a Society 3. Charitable Trust registration
The trust property can be sold with the consent of the trustee and all beneficiaries. If the trust property is sold, the proceeds must be distributed among the beneficiaries in accordance with the trust deed.
The trustee must submit a losure application to the Registrar of trusts. The application must include the trust deed, a declaration of trust and all other relevant documents. The trustee must also provide the Registrar with the trust's bank statement for the last six months. Upon review of the application, the Registrar will issue a closure certificate to the trustee.
The trust is managed by a board of trustees. The board constitutes the following: Author/Founder/Settlor of the trust Managing trustee(s) Other trustees The quorum of the board of trustees shall not exceed a maximum of 21 members.
There is no blanket tax exemption for trusts in India. Trusts are exempt from income tax on certain types of income, such as rent, dividend, interest and capital gains provided they register. However, trusts must pay tax on other types of income, such as salary and business income.
Tax exemptions are provided under Section 12A and 80G of the Income Tax Act. Registration under these sections is required to avail tax benefits for the trust.