Trust Registration In India

Income Tax Act, 1961, defines a Trust as “An arrangement by which property is handed over to or vested in a person, to use and dispose of for the benefit of another person”. Creation of a Trust can be broadly classified into two methods namely private trust formation and public trust formation.

Private Trust Formation

A private trust may be created either inter vivos or by will. Creation of Trusts are subject to the provisions of Indian Succession Act, 1925.

Public Trust Formation

Similar to private trusts, public trusts may be created either inter vivos or by will.

A trust can be public even if the control of the trust property was not vested in the public but was retained by the settlors, provided that the funds are utilized for the welfare of the public, which makes it clear that the public trust can be headed and controlled by a private entity

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    Steps for Trust Registration in India:

    1. Selection of Trustees:
    A trust must have a minimum of two trustees. There is generally no maximum limit, but it is advisable to keep a reasonable number to ensure effective administration.

    2. Selection of Settlor (Author of the Trust):
    The settlor is the person who establishes the trust by transferring property to the trustees. The settlor can be one of the trustees, but it is not mandatory.

    • 3. Creation of Trust Deed:
      Prepare a trust deed, which is a legal document that defines the purpose of the trust, the powers of the trustees, the mode of succession, and other important details.
    • The trust deed should be executed on non-judicial stamp paper, and it should be signed by the settlor and the trustees.

    4.Registration of Trust Deed:

    • It is not mandatory to register a trust deed, but registration provides additional evidentiary value and is recommended.
    • To register, the trust deed must be submitted to the local sub-registrar office. The trustees and the settlor may need to be present along with identification documents.

    5. Submission of Documents:

    Along with the trust deed, submit a copy of the trust deed, a passport-sized photograph of each trustee, and address proof of the registered office of the trust.

    6. Payment of Fees:

    Pay the applicable registration fees. The fees vary from state to state.

    7. Verification and Approval:

    The sub-registrar will verify the documents and, if everything is in order, approve the registration. The registered trust deed will be returned to the trustees.

    8. PAN and TAN Application:

    Obtain a Permanent Account Number (PAN) for the trust from the Income Tax Department. If the trust is liable to deduct TDS (Tax Deducted at Source), apply for a Tax Deduction and Collection Account Number (TAN).

    9.Bank Account:

    Open a bank account in the name of the trust using the registered trust deed and PAN.

    9. Income Tax Registration:

    Apply for income tax registration under Section 12A of the Income Tax Act to avail of tax exemptions.

    Additional Considerations:

    1. Name of the Trust:

    Choose a unique and appropriate name for the trust.

    1. Compliance:

    Comply with the ongoing requirements, such as filing annual returns, maintaining proper accounts, and adhering to the objectives mentioned in the trust deed.

    1. Legal Advice:

    It is advisable to seek legal advice to ensure compliance with the latest legal requirements.

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