Public charitable trust is a form of not-for-profit entity in India. The Trusts in India are registered and governed by the Indian Trust Act 1882.
Section 6 of the Indian Trust Act, 1882 explains that trust is created through the author of the trust with reasonable certainly state the intention to create trust as well as specify the purpose for which the trust is formed and also to state the beneficiary towards receiving benefits from the trust.
Documents required for Trust Registration
The documents required for Trust registration are:
The particulars of trustees which include their name, occupation, address, age, father’s name, designation, phone number, email address and two photos are needed.
Address Proof of Trustee and Settler is required: – Voter I.D or Driving license or Passport.
Electricity Bill/ House Tax Receipt/ Water Bill Receipt/ Ownership Proof of Property is required.
For Rented, Rent Deed duly notarized with rent receipt as well as NOC from Land Lord on Rs 10/- Stamp Paper. Name of Landlord, Father’s name, Residence Address.
Physical Presence of Settler is required at the time of Registration along with Original ID.
Physical Presence of two witnesses with original ID Proof is required at the time of Registration.
Trust Registration
The primary step to register a trust begins with the drafting of a trust deed. The trust deed is required to be executed on appropriate non-judicial stamp paper; the rate of stamp duty varies from state to state. The next stage is to make an appointment with the sub-registrar office having jurisdiction based on the registered office of the trust, as well as the government registration fee must be paid after that.
The trust deed must be presented on the appointed date before the sub-registrar where every trustee is required to be present along with two witnesses. The registration procedure is then undertaken through the office of the sub-registrar, and the registered deed could be collected after a week time. The next step is to get the PAN and TAN Number allotted for the trust and opens a Bank A/c for the trust.
Steps to Register the Trust Deed
• Preparation of the Trust Deed.
The primary step is to draft the Trust deed. Trust deed is non-mandatory but is essential as it is enforceable by law. The details required to be mentioned in Deed are:Name and address of the Settler.
Name and address of all other trustees.
Name of trust.
Minimum as well as the maximum number of trustees.
Registered office address of the trust.
Purposes of trust.
Rules and Regulations of trust.
Parties to the trust.
Three parties are needed in order to form the Trust.
• Applicant /Author of the trust
The author is the individual who declares confidence in the Trust. The Name and Address of the author must be mentioned in Deed.
• Details of trustees / Members
The trustee must not be a minor and is required to be of sound mind. The full name, address, occupation, and age, and designations of the trustees/members are required to be mentioned.
• The beneficiary of the Trust
A beneficiary of the trust is an individual who is going to be benefitted by the formation of trust. Generally, the author himself is the Beneficiary or it is public in general.
• Objects of the Trust
Trust could be formed for charitable purposes only. The full objective of Trust must be incorporated in the deed.
• The subject matter of the Trust
The subject matter of the trust is the property relating to which the trust was created. The subject matter is required to be defined and property of trust must be capable of disposition to create a valid trust.
• Registration of the trust by Trust Deed
After the preparation of Trust, the next important step is to register the Trust deed. Trust Registration is not obligatory but is desirable to get the trust registered under the Income Tax Act for obtaining the exemptions. The trust deed must be submitted to the local registrar with the one photocopy and the settler must sign all the pages.
• Name of the Trust
One must give at least 3 options in the order of preference of name of a Trust.
• Address for correspondence and Evidence
Recent electricity Bill or Telephone Bill or Property Card of the Trust location
• Tenure of Trustees
The Tenure of Trustees shall be fixed for a minimum 1 year to a maximum of 5 years.
• Application for 80G and 12A certificate for tax benefits
After the valid trust registration, one must apply for 12A and 80G registration in order to get the Tax advantage.
Compliances of the Trust
A trust after it gets registered must carry out the following things, which includes:
Obtaining PAN card.
Book Keeping and Accounts.
Annual IT filings.
Shops and Establishment License - for employment.
Professional Tax Registration - if applicable.
GST registration - if applicable.
Tax exemption Applicability
There is a general view that trust is not required to pay tax as they work for the welfare of the public at large. But trust, like any other legal entity, is legally responsible to pay tax. With the purpose of being exempted from tax, trust is required to obtain certification for the stated exemptions such as Section 12 A, 80G, etc. from the Income Tax authorities.
Section 12A, the Tax benefit for a Trust
Any voluntary aid received by Trust or income out of property held under Trust are exempted from Income Tax provided such Trust is registered under section 12A of Income Tax Act, 1961.
The Trust registered under section 12A of the Act is required towards applying to the Director of Exemption, Income Tax in the set form (10A) along with the documents, which comprises:
Memorandum and Articles of Association of the Trust Deed.
Rent Agreement or NOC from the landlord of the sites of Registered Office.
PAN card of Trust.
Evidence of welfare activities carried out and the Progress Report since the beginning.
Balance Sheet & ITR (if any), since the beginning or last 3years.
List of donors with their address as well as PAN.
List of Governing Body or Board of Trustees or Board of Directors with their contact details and PAN.
Original RC and MOA or Trust Deed for verification.
The Income Tax Department after being satisfied regarding the charitable character of the Trust would grant registration certificate under section 12A of the Act. The Registrar might also verify the submitted original documents. The registration granted is valid for an unlimited period until unless it is canceled through the Issuing Authority.
Section 80G, Tax Benefit to Donor and Trust
When a Trust gets itself registered under section 80G then the individual or the organization making a donation to the Trust would get a deduction of 50% from its taxable income. The Trust could apply for necessary Registration under section 80G of the Act in Form No. 10G when filing the application in Form 10A for tax exemption under section 12A of the Act.
The Trust is eligible for registration under section 80G of the Act on fulfillment of few conditions:
The Trust must not spend any income or assets for any purpose apart from a charitable purpose.
The Trust must not be for the benefit of any particular religion, community, or caste.
The Trust must maintain regular books of accounts as well as get them audited.
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