A private trust, created under and governed by the Indian Trusts Act of 1882, aims at managing assigned trust property for private or religious purpose.
The law relating to private trusts is governed by the Indian Trusts Act ("Trust law"). A trust is basically a vehicle under which property is transferred from the original owner and held by the person to whom it is transferred for the benefit of another. The "author of the trust", the "trustee", the "beneficiary", the "trust-property", the "beneficial interest" and the "instrument of trust" are the integral elements of a trust. A trust can be created for any lawful purpose.
A trust can be registered in one State, but the same may have a scope to operate in any number of States. In the state of Maharashtra and Gujarat, all organizations that are registered as ‘Society’ are by default also registered as Public Trust. The trustees are required to manage the trust and they are also liable for breach of the trust. Trustees are individually as well as collectively responsible for every action carried out on behalf of the trust.
A trust can constitute a tax efficient structure, especially from a long term perspective. The concept of dividend distribution tax and minimum alternate tax applicable to a company is not applicable to a trust. Thus, income earned by a trust or that distributed to beneficiaries is not liable to such additional taxes. Transfer of property by the settlor to the trust is not eligible to capital gains where the trust is irrevocable.
The biggest advantage of the Trust is that any property transferred to the Trust during your life time will pass directly to the beneficiaries of the Trust. The Trust property will not have to go through a Probate court. The advantages of avoiding Probate are that:
a. No Probate fees are due on property passing outside of Probate
b. The property will pass immediately to the beneficiaries.
c. The terms of the Trust remain private.
b. The property will pass immediately to the beneficiaries.
c. The terms of the Trust remain private.
Disadvantages of a Trust
1. The need to draft a Trust document.
2. The loss of legal control of assets. All assets are handed over to the Trust and are managed by the Trustees for the benefit of the beneficiaries. Author of the Trust can no longer own the assets, but he can exercise some control over them by being a Trustee.
Documents for registration of Trust
1. First register documents called Trust Deed.
2. This documents contain all information about trust and is printed/written/typed on plain paper these papers you would need to attach Rs. 100 Non-Judicial stamp paper. 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.
3. Need a no-objection certificate from the owner of the property. where the registered office of the trust is to be situated
Following elements must be mentioned in the trust deed
• 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
• 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
4. For registering a trust you need minimum two trustees (i.e. one settler and another person). You can decide maximum number of trustees and it must be mentioned in the trust deed. All the trustees together are called Board of Trustees.
Documents required for registration of 80G certificate
• Dully filled in Form – 10G for registration u/s 80G registration;
• Registration Certificate and MOA /Trust Deed (two copies – self attested by NGO head);
• NOC from landlord (where registered office is situated);
• Copy of PAN card of NGO;
• Electricity Bill / House tax Receipt / Water Bill (photocopy);
• Evidence of welfare activities carried out & Progress Report since inception or last 3 years;
• Books of Accounts, Balance Sheet & ITR (if any), since inception or last 3years;
• List of donors along with their address and PAN;
• List of governing body I board of trustees members with their contact details;
• Original RC and MOA /Trust Deed for verification;
• Any other document I affidavit / undertaking I information asked by the Income Tax department
• Registration Certificate and MOA /Trust Deed (two copies – self attested by NGO head);
• NOC from landlord (where registered office is situated);
• Copy of PAN card of NGO;
• Electricity Bill / House tax Receipt / Water Bill (photocopy);
• Evidence of welfare activities carried out & Progress Report since inception or last 3 years;
• Books of Accounts, Balance Sheet & ITR (if any), since inception or last 3years;
• List of donors along with their address and PAN;
• List of governing body I board of trustees members with their contact details;
• Original RC and MOA /Trust Deed for verification;
• Any other document I affidavit / undertaking I information asked by the Income Tax department
Both applications can be applied together or it can also be applied separately also. If some organization is willing to apply both applications separately, then application for registration u/s 12A will be applied first. Getting 12A registration is must for applying application for registration u/s 80G of Income Tax Act, 1961.