A trust can be either private or public. Private trusts are governed by the Indian Trusts Act, 1882 and are used for private purposes, such as running a private estate or institution. For doing a charitable work for public, Public charitable trusts can be set up. India doesn’t have a national level law to govern charitable trusts, however; few states have enacted Public Charitable Trusts Act and NGO trust registration has to be done.
♦ BASIC CONCEPT BEHIND TRUST AND GENERAL TERMS:
♦ Author/settler of Trust: Any person who is competent enough to enter into contract can be Author of trust. Any person with the permission of principal Civil Court of original jurisdiction may create a trust on behalf of a minor.
♦ Trustees: Every person capable of holding property may be a trustee. Trustee can accept trust by words or by way of an act. He is bound to fulfill the purpose of trust for which it is created. There is no educational qualification is prescribed in law thus even an illiterate person capable to enter into contract can be appointed as trustee.
♦ Beneficiaries: According to Indian Trust Act, 1882 any person capable of holding property can be beneficiary. In case of Public Trust, beneficiaries include general public at large.
♦ Trust Property: Trust Property is the subject matter of trust. Trust can be created for both type of property, i.e. either moveable property or immoveable property.
♦ Trust Deed: It is an instrument of trust by which trust is declared. To register a trust, memorandum has to be prepared first. It defines the relationship of the Author with the Trustees and specifies the objectives for which such a Trust is formed. Trust Deed contains various clauses such as Name clause, Registered Office Clause, Settler and Trustee Clause, Object Clause and Beneficiaries, General Body Member Clause and other Rules and regulations.
♦ ELEMENTS OF TRUST DEED:
» Name of Trust
» Name and Address of Author of Trust
» Name and Address of Trustees appointed
» Minimum and Maximum number of Trustees (When the administration of the trust involves the receipt and custody of money, the number of trustees should be at least two)
» Name of Committee/Governing Body of Member
» Address of Registered Office of Trust
» Purpose Behind formation of Trust
» Objectives of Trust
» Information related to opening of Bank Account
» Membership and Subscription Clause
» Procedure of appointment, removal, resignation, replacement of Trustees
» Right and Duties of Trustees
» Obligation of Trustees
» Manner of Alteration of Trust Deed
» Number of Meeting
» Quorum for meeting
» Manner of appointment of Auditor for Trust…..etc
Trust Deed shall be prepared on non judicial stamp paper of appropriate value.
♦ DOCUMENTS REQUIRED FORREGISTRATIONOF TRUST:
> Identity Proof of Author
> Identity Proof of Trustees
> Rent Agreement or Registration Paper of Property
> Address Proof of Property
> NOC from Landlord (If Rented)
> Passport Size Photo of Author and Trustees
♦ PROCEDURE TO CREATE A TRUST HAVING CHARITABLE OBJECT:
> SELECT NAME OF TRUST: Choose appropriate name for your Trust. While choosing name ensure that name of Trust should not be under the restricted list of names as per the Provision of Emblem and Names Act, 1950
> SELECT AND DETERMINE NUMBER OF TRUSTEES: Determine the trustees for your trust. Minimum number of trustees should be 2 (Two). There is no restriction on maximum number of trustees in the Trust Act.
> PREPARE TRUST DEED: Prepare Memorandum of Association and Rules & Regulation (Buy-Laws) for your trust which is also known as Trust Deed. This instrument is very essential as it is the legal evidence of your trust formation. Deed shall be prepared on stamp paper of appropriate value. Value of Stamp paper shall be certain percentage of total value of trust property which varies from State to State.
> REGISTER WITH SUB-REGISTRAR: For registration of trust deed, Trustees and Author of trust along with 2 witnesses required to present before sub-registrar office have having jurisdiction based on registered office of the Trust along with properly attested photocopy of trust deed and have to pay registration fee for this purpose. Proof of registered address and NOC of Landlord (if Rented) should be attached with the Trust Deed.
> APPLY FOR PAN & TAN OF TRUST: On registration of Trust Deed, the logical step is to apply for PAN & TAN of Trust and to open Bank Account for the trust.
♦ BENEFIT OF REGISTRATION:
Income of registered NGOs either as Public Trust or Society or Section 8 Company are exempted from the tax.
Tax exemptions can only be provided to the registered trust under new Section 12 AB and 80G of the Income Tax Act. Income Tax registration is mandatory to avail certain tax exemption.
Credibility will be more if the trust is registered as it involves money of individuals in the form of donations.