The registration process of trust is easy and can be executed by a trust deed; However, there are two types of trust- a public trust (charitable trust) is created for the benefit of the common public, on the other hand, a private trust is created for the benefit of a particular group of individuals known as the beneficiary.
Registration Process Of Trust Under The Indian Trusts Act 1882
Trust is defined by The Indian Trust act as “A trust is created when the author of the trust indicates with reasonable certainty by any words or acts:
- An intention on his part to create thereby a trust,
- The purpose of the trust,
- The beneficiary, and
- The trust-property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transferred the trust-property to the trustee.” Registration of a Public Charitable Trust is to be done in the office of the Charity Commissioner, who has jurisdiction over the trust.
For the registration process of trust, one needs to follow the steps mentioned below:
Step 1: Choose and Varify the name of the Trust
The person needs to choose a name that is suitable for the Trust. This is the most basic step that gives a start to the registration of the Trust. When one is pondering over the name, he/she should take care that the name is not offering any patronage by any State Government or the Government of India. The name that is chosen by the individual should not be mentioned under the provisions of the Emblems and Names Act, 1950. Though, using a name that has already been registered as a Trust in the office can be used by the individual to name his/her Trust. If the registrar in the office refuses to register the name of the Trust provided the name is not violating any act or rules, then the individual can always approach the higher authorities and file a complaint so that necessary measures are taken.
Step 2: Choose the Author/Settler and Trustees of the Trust
The individual needs to decide the Author/Settler and Trustees of the Trust. The rule regarding how many Author/Settlers should be there is not mentioned anywhere. This is a choice made by the Sub-Registrar at the office. Traditionally and in general, there is only one Author or Settler. The minimum numbers of Trustees that are needed are two, and there is no restriction on the maximum number of Trustees. Author/Settler is generally not considered to be Trustees. This is usually dependent upon the will, understanding, and choice of other Trustees. A Trustee does not need to have a specific educational qualification. This extends an opportunity for an illiterate person also to become a Trustee. In females, the minimum age to become a Trustee is 18 years, while in the case of male Trustees, the minimum age is 19 years. A proper resident of India can only become a Trustee. OCI cardholders, NRIs living in foreign countries, and Foreigners residing for about more than six months abroad are not qualified to become a Trustee.
Step 3: Provide the Trust Deed
The individual needs to develop a Memorandum of Association, which states the rules and regulations of the intended Trust. This comes to be known as Trust Deed and is considered to be extremely important, serving the purpose of a legal document proving the existence of Trust. The Trust Deed need to contain different clauses which are as follows:
- Registered Office Clause
- Name Clause
- Object Clause and Beneficiaries
- Settler and Trustee Clause
- General Body Member Clause
- A table should be created, which has the name, occupation, and address of the members along with their signatures. The section of Rules and Regulation comprises of the Clauses given below:
- Subscription Clause
- Governing Body/Committee Clause
- Legal Procedures such as replacement or removal of Trustee, appointment, duties, and powers, rights, etc.
- Membership Clause
- Property that will be transferred to the trustee(s) under the trust for the benefit of the beneficiaries
- Meeting Clause
- An intention of divesting the trust property upon the trustee(s)
Also read: What is Form 26AS & How to download it?
Bylaws of the Trust
Each rule that applies to the Trust should be mentioned pointwise. This takes into account the sections of the Indian Trust Act, Income Tax Act applicable, and other laws and regulations applicable to implement and manage the working of the intended Trust. All the process that needs to be followed to open a bank account should be mentioned and given in detail. The bylaws are mentioned in the Trust Deed. Proper process about the addition, changes, or removal of trustees should be established. If bylaws are not included, the trust deed is considered to be incomplete and useless. This is the reason that it is suggested to hire a professional who is familiar with trust deeds. In the absence of a trust deed, an individual might face problems in the future, such as proving the trust’s legibility.
Step 4: Provide the other necessary documents
The individual must have all the necessary documents at the time of submission. Trusts are mostly permanent. This refers to the fact that trust cannot be wound up. A trust deed is not a compulsion while forming a Trust. A trust can be formed by oral agreement or mere deed. However, it is advised to the trusts with immovable property and the charitable trust to have a trust deed. In some cases where trust deed is not available, other documents such as property tax receipts, affidavits, revenue records for lands, and other such documents might be accepted in place of the trust deed.
a) The characteristics of the Trust Deed which must be present in it are:
- Name and Address of the Author/Settler of the Trust
- Name of the Trust
- Address of the registered office of the trust
- Names and addresses of the other trustees
- Maximum and minimum number of trustees. The minimum is too while the maximum has no limit. But the individual should decide the maximum number of trustees that the trust can have. The trust is governed by all the trustees collectively and is called the Board of Trustees.
- The purpose behind the formation of the trust
- Rules and regulations of the trust
- Objectives of the trust
- Conditions under which a trustee stops to be a one
- Date of execution of the Trust Deed
- Information of the bank account: involving the bank and branch where the individual prefers to open an account
- Board of trustees can also include various designations for trustees such as Managing Trustee and Chairperson
- Decide for the posts and responsibilities that each of them needs to do in the Trust Deed
- Tenure of the trustees should be specified in the Trust Deed
- Rights, duties, and limitations of the trustees
- Procedures to alter, modify or vary any clause in the Trust Deed
- Different plan in which income will be dispersed among beneficiaries
- Number of meetings to be organized each year and conditions regarding the number of meetings which are mandatory for trustees to attend
- Details of the trust fund set up by the settler and the movable, immovable property included in the trust fund.
b) It is on a stamp paper that a trust deed should be prepared. This value of stamp paper is required to have some percentage of the total value of Trust’s Property. This percentage varies in each state such as in Delhi 8% is the value of the stamp paper. It is important to have the consent of all members, either verbal or written. Laws taking into account the physical presence of the trustees differ in every state. Though, everywhere in India, the settler must be physically present. In some of the states, original photo Ids and self-attested copies of trustees rather than their physical presence are enough. In the sub registrar’s office at the time of registration, two witnesses and the settler are necessary to be present at that moment o time. Ids of these people are checked by the sub-registrar. Then, the Trust Deed is given to the counter where the process of data entry takes place. In the end, two witnesses and the settler will be photographed. There is a deposit of Rs. 1100 to be made for this process to take place. Once the papers are submitted, the individual can go after one of submission to receive a copy of the Trust Deed with the sub-registrar.
c) For the individual to register the Trust Deed under the Indian Trusts Act, there are some of the requirements which are:
- Self-attested copy of the proof of identity and two passport size photograph of the settler
- Trust Deed on stamp paper of the requisite value
- Self-attested copy of the proof of identity and two passport size photograph of each trustee
- In some of the states such as Madhya Pradesh and Rajasthan, Pan Card is Mandatory. Whereas in other states, if a part of the Trust Property or the amount of the Trust Property is more than Rs. 20000, then Pan Card is mandatory.
- Signature of the settler on each page of the Trust Deed
- Proof of the registered office address of the Trust is supposed to be attached to the Trust Deed. This can be a water bill, registration certificate, or electricity bill. There might be a need to submit a no-objection letter, which is signed by the landowner along with his identity proof. Generally, registration of the Trust is done at the office of the Registrar of the state or area under whose jurisdiction the official address of the trust comes. However, the address of the trust is not counted as the property of the trust. Office addresses can be given as any place in India, but there are some limitations in some of the places. For example, in Delhi, the registered office premises should be in legally registered or authorized commercial or residential places. Agricultural land, farmhouses, and industrial buildings cannot be used as office address. The office address needs to be registered with the local sub-registrar. Unauthorized addresses are not allowed to use. There is no clarity in the rules about the office address in the Registration Act or the Indian trust Act. The parameters related to this subject are left to the judgment of the sub-registrar and the norms that a particular state follows. If the sub-registrar is giving a hard time to any individual, then this can be taken up to higher authorities and can be challenged legally in the court. More than one address can be added by the settlor or the trustees as the office address of the Trust. This can be taken into consideration while opening a bank account or several other branches in the future.
- Trust property or a part of it is more than Rs. 20000 then Pan Card is compulsory.
- There are some of the states such as Madhya Pradesh or Rajasthan where Pan Card is mandatory.
- The individual should mention the property registered in the name of the Trust and also attach the proof with the documents that one needs to submit at the time of registration. The value of the property of the Trust should be mentioned in the Trust Deed. This property can be any immovable or movable asset. Under immovable asset comes the building, plot, or land, and on the other hand, under movables ones comes the cash amount. There is no maximum or minimum ceiling in the movable property. There is no compulsion to include immovable property in the Trust Deed. If the Trust of the individual has some property, then mention it and if not then do not fret. It is fine to register a Trust that does not have its property. For Trust Deed to be registered with the local registrar under the Indian Trusts Act, there are some of the requirements. These include Trust Deed on stamp paper of requisite value, self-attested copy of the proof of identity and two passport size photographs of each trustee and self-attested copy of the proof of identity and two passport size photographs of the settler.
- Witness by two persons on the Trust Deed. One passport size photograph & copy of the identity proof of each of the two witnesses.
For the registration process of trust, the government registration fee is valued according to the Revenue Tax Rules in some of the states. These calculations are done on the spot while registration, and hence, these calculations cannot be predicted. However, there is some amount that needs to be paid through stamp paper of that particular value, online demand draft, or a demand draft. This amount needs to be paid at the time of the submission of documents. The remaining fee can be paid later in the office of the registrar or to authorized associate revenue agency once the calculation of the full fee is done. This fee differs in every state.
The Trust Deed should give information about the objectives and aims of the Trust of child welfare, environmental protection, old age homes, human development, social welfare, etc. If the individual has a certain specific objective to form the Trust, then this objective can be mentioned as primary objective Trust along with the other general social welfare objectives. Many objectives are inter-related with each other. Specific objectives are usually included with the objectives required by the ministries or government bodies by the consultants. The individual can also choose to work on anyone’s objective that he/she has mentioned in the Trust Deed.
An area of operation or working area is given in the Trust Deed. Generally, a Trust that has been registered in India has a national status. However, there have been no clear laws and regulations regarding this case, which has led to bureaucratic confusion, and many different registrars have their differing parameters. Any organization which has been registered as Delhi is considered as a National Organization. It is all upon the will of the founder where he/she wish to register the Trust. There have been no cases or issues regarding the receiving of the projects or funding from the central ministry or government department of any state.
Step 5: Document Verification of the Author/Settler and Trustees of the Trust
For the registration process of trust, the Trust Deed and properly attested photocopies with the local registrar needs to be submitted. Settler should sign every page of the photocopy of the Trust Deed. When the registration of the Trust is taking place, the two witnesses and the settler need to be present physically having their identity proofs. However, there is no firm law regarding the presence of the trustees. There are some of the states which require trustees to be present physically, while some states are satisfied with the written consent and the identity proofs of the trustees.
Step 6: Submission of the documents
The photocopy will be retained by the registrar, and the original copy of the Trust Deed is returned.
Step 7: Final Verification from the registrar
Once all the necessary documents and registration have been done, a minimum of seven working days are needed to obtain the registration certificate. There is no mention of the rules, but there are some of the registrars that may want to check the registered office address with the help of an official letter being sent to that place for verification.
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