Trust Registration

A Trust is an arrangement where owner or trust or of Trust transfers the property to a trustee. Such transfer of property is done for the benefit of a third party. The property is transferred to the trustee by the trust or along with a proclamation that the property should be held by the trustee for the beneficiaries of the trust.

The Indian Trust Act 1882, provides for the provisions related to Trust in India. The Trust Registration is advisable in India for obtaining the benefits.

What are the advantages of Trust Registration ?

The advantages of registering a trust are as follows:

• To Involve In Charitable Activities
• Registered Trust Avails Tax Exemptions
• Provides benefits To unprivileged People
• Compliance With Law
• Preservation Of Family Wealth
• Avoid Court
• Immigration/Emigration Of Family
• Forced Heirship
• Tax Mitigation
• Managing Assets

What are the Parties Involved in the Trust Registration Process?

The parties involved in the Trust registration process are as follows:

• Trustor
• Trustee
• Beneficiary

What are the Types of Trusts?

In India, there are two types of trust which are as follows:

• Private Trust: A Private trust is a trust that is created for the benefit of 1 or more individuals who are, or within a given time may be, definitely ascertained. In other words Private Trusts are constituted for the benefit of individuals rather than for the benefit of public. Private Trusts are governed under the Indian Trusts Act 1882 and may be created inter vivos or by will.
• Public Trust: A Public Trust is a trust which is constituted wholly for the benefit of Public at large. The major provisions under Public Trusts are as follows: –
  • Public trusts are basically divided under charitable or religious trusts and are regulated by the general Law.
  • The regulations of Indian Trusts Act which is applicable on private trusts, do not apply to Public Trusts.
• Like private trusts, public trusts may also be established inter vivos or by will.
  • The Charitable and Religious Trust Act, 1920, the Religious Endowments Act, 1863, the Charitable Endowments Act, 1890, the Bombay Public Trust Act, 1950 are some of the Acts for the enforcement of public trusts in India.
• Public-Cum-Private Trusts: Those trusts whose income may be used for public purposes as well as a part may go to a private person or persons are known as Public-cum-Private Trusts.

Classification in Terms of Motive of Formation

Recently, trusts can also be used as a vehicle for investments, such as mutual funds and venture capital funds. These trusts are governed by Securities and Exchange Board of India (SEBI). Classification in terms of motive of formation is as follows: –

• Private Trust: Settlor creates a Trust primarily for benefit of one or more particular individuals as its Beneficiary.
• Public Trust: Beneficiaries are the general public or a class as a whole. It has some charitable end as its Beneficiary.
• Simple Trust: Trustee is just a passive depository of the Trust property. There are no active duties expected from Trustee and no directions are given to him.
• Special Trust: Trustee is active and acts as an agent to execute the Grantor’s wishes. This Trust is operative.
• Express Trust: Here, the Settlor creates a Trust over his assets either in present or upon his death. It can be either by way of a will or Trust deed.
• Implied Trust: It is created where some legal requirements for an Express Trust are not met, but intention on behalf of the parties is to create a Trust that is presumed to exist.
• Others depending on the type of object(s).

Documents required for Trust Registration in Nagpur

The documents needed for registering a trust are mentioned below:

• Proof of Identity for Trustor & Trustee-Aadhaar Card, Voter ID, Passport, Driving License
• Address Proof of Registered Office- Copy of Certificate of Property/Utility Bills (Telephone, Water, Electricity Bill)
• In the case of rented property, No Objection Certificate from the owner is needed.
• Objective of the Trust Deed.
• Particulars of the Trustee and settlor (Self-attested copy Id and Address Proof along with the data associated with occupation).
• Trust Deed on correct Stamp Value.
• Photographs of Trustee and settlor.
• PAN Card of Trustee and settlor.

What is included in deed of trust?

The Trust deed involves the following information: –

• Total number of trustees.
• The Registered address of the trust.
• Proposed name of the trust.
• Rules and laws to be strictly followed by the Trust.
• Presence of settlor and two witnesses at the time of registration of Trust.

What are the Penalties that can be levied on Breaches in Compliances of Trust Registration?

There are three types of penalties that can be levied in case of non- compliances of trust registration that are mentioned below:

• Civil And Criminal Penalties: In case of Breach of trust, section 405 to Section 409 of the Indian Penal Code 1860 can be imposed on the beneficiary that means both civil and criminal penalties may be imposed.
• Application For Tax Deduction Account Number: On registration of a trust or an establishment, the trust or an establishment should apply for tax deduction account number in form number 49B of Income Tax rules to Assessing Officer or the prescribed authority and quote the tax deduction account number on all the challans for payment of sums under section 200, on all the TDS certificates and all the returns delivered under section 206, 206A and 206B. In case of non- compliance of above sections, a penalty of Rs. 10,000/- can be levied as prescribed under section 272BB.
• Failure To Furnish The Return Of Income: If the trust or institution fails to furnish the return of income then it attracts penalty under the Act. If the certificate for the TDS has not been provided along with the ITR due to the default of the payer in not furnishing such certificate then the ITR will not be considered as defective. However, the certificate is required to be produced within 2 years from the end of the assessment year.

What is the Impact of Section 12AB on Trust Establishments?

To continue taking exemption below section 10 or 11 all the present charitable trust or establishments are mandatorily needed to get a fresh registration under Section 12AB which are already registered under the below mentioned section:-

• Section 12A
• Section 12AA
• Section 10(23C)
• Section 80G

Is it necessary to E-file the ITR for a Trust?

A trust should file a ITR electronically-

• With or
• Without a Digital signature.
• Under the Electronic Verification Code.

However, trusts who are liable to get its accounts audited section 44AB shall furnish the return electronically.