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Trust Registration

Trusts are a noble business structure designed to advance sciences, literature, and other worthy causes. They play a crucial role in addressing scarcity, offering education, and providing medical support. Trust registration, carried out under the Trusts Act of 1882, is the official process of registering a trust. This legal step ensures the trust’s recognition and compliance with the law, granting it legal validity and establishing its separate entity status.

For those considering the creation of a non-profit or charitable trust, trust registration is essential for effective operation and adherence to legal obligations. At Bmcs, our dedicated team of professionals is poised to assist you at every step of the trust registration process, aiming to provide a seamless and efficient experience.

Contact us today to discuss your trust registration needs and leverage our expertise in establishing legally compliant and effective trusts.

Trust & Trust Registration – An Overview

Individuals establish trusts to allocate a portion of their assets or property for the benefit of another person. In this fiduciary relationship, the trust involves three key parties: the trustor, trustee, and beneficiary, as outlined in the trust deed submitted during trust registration.

A trust comes into existence when the trustor transfers a specific asset or property to the trustee for the ultimate benefit of the beneficiary, typically a third party with connections to both the trustor and the trustee. Therefore, the nature of the relationships among the involved parties is crucial in defining a trust.

As per the Indian Trusts Act of 1882, a trust is officially defined as a “relationship between the trustor and trustee to hold specific benefits for the beneficiary.”

Parties involved in the Trust Registration Process:

Trustor:

The trustor is the person who establishes the trust. Typically the owner of the assets or property being placed in the trust, the trustor initiates the trust creation.

Trustee:

The trustee is an individual or entity entrusted with the responsibility of managing and overseeing the trust. They act as custodians of the trust property, administering it on behalf of the trustor and for the benefit of the beneficiary.

Beneficiary:

The beneficiary is the individual for whom the trust is created. They are the intended recipient of the benefits, assets, or property held within the trust. Often a third party known to both the trustor and trustee, the beneficiary is entitled to receive benefits as per the trust’s terms and conditions.

Trusts can be classified into various categories based on the activities they undertake. Here are the different types of trusts:

  • Public Trust
  • Private Trust
  • Public Cum-Private Trust

Private Limited Trusts:

Private Limited Trusts are established to conduct activities for specific individuals, families, or close associates. These trusts often have beneficiaries closely related to the trust’s founders and are governed by The Trusts Act of 1882.

Public Limited Trusts:

Public Limited Trusts are typically created to benefit the general public. They serve purposes such as charity, education, and religion and are governed by specific statutes like the Religious Endowments Act of 1863, the Charitable and Religious Trust Act of 1920, or the Bombay Public Trust Act of 1950. Charitable and religious trusts are the most common types of public trusts in India.

Public Cum-Private Trust:

This trust serves both public and private purposes, utilizing its income for the benefit of the public and specific individuals or families. The beneficiaries of a public cum-private trust can be a combination of public and private individuals.

Regulatory Authority and Laws for Trust Registration

The Registrar of Trusts serves as the primary regulatory authority overseeing trust registration in India. Their responsibility includes maintaining a comprehensive database of all registered trusts in the country. The registration process for private trusts is governed by the Trusts Act of 1882.

In the case of public trusts, there is no singular governing act applicable uniformly. Public trusts in India must be registered with the relevant state authority as required by the applicable state act.

Several laws contribute significantly to the regulation of trusts in India:

 
  • Trusts Act of 1882: This act establishes the legal framework for the registration and administration of private trusts. It delineates the rights, responsibilities, and procedures associated with private trust registrations.
  • Income Tax Act of 1961: The Income Tax Act provides certain tax benefits and exemptions to registered trusts. Donors can leverage tax deductions under this act when contributing to registered trusts.
  • Societies Registration Act of 1860: While not directly governing trust registration, this act regulates the formation and functioning of societies involved in charitable, literary, scientific, or artistic activities. Societies often work alongside trusts and may engage in similar endeavors.

Trust registration is necessary for the following reasons:

  • Trust registration ensures proper regulation of trust activities, ensuring compliance with laws and regulations.
  • Trusts aim to promote non-commercial activities in areas like arts, science, education, and the environment, contributing to a better society.
  • Registered trusts can claim income tax benefits under sections 12A and 80G, encouraging donations and support.
  • Public trusts serve the general public, and registration ensures they act in the public’s best interests.
  • Trust registration provides a license to conduct trust-related businesses within the legal framework.
  • Trusts contribute to the development of sectors like education, healthcare, social welfare, and the environment.

By registering, trusts fulfill their objectives, gain legal recognition, and access government benefits and opportunities.

Benefits of Trust Registration

Trust registration provides numerous advantages for individuals and organizations. Here are the key benefits:

  • Charitable Involvement: Setting up a Charitable Trust allows individuals to benefit themselves, their beneficiaries, and chosen charities through structured philanthropic activities.
  • Tax Exemptions: Registered trusts in India can access tax exemptions provided by the Income Tax Department, enjoying relaxations and benefits.
  • Financial Support: Registered trusts contribute essential financial assistance to the underprivileged and the public through charitable activities.
  • Legal Protection: The Indian Trusts Act of 1882 ensures comprehensive legal protection, safeguarding the trust's legal standing from unnecessary claims.
  • Family Wealth Protection: Trusts help allocate specific assets, preserving and managing family wealth that may be challenging to divide individually.
  • Probate Avoidance: Trust registration enables the transfer of assets to heirs without probate, streamlining the asset distribution process.
  • Immigration/Emigration Benefits: Establishing a trust can be advantageous when relocating, offering benefits such as tax mitigation, asset safeguarding, and flexibility in asset organization.

By registering a trust, individuals can enjoy these benefits, encompassing financial advantages, legal protection, and flexibility in asset management.

To be eligible for trust registration, the following criteria must be met:

 

  • A trust must be formed by at least two or more individuals.
  • The trust must be established in accordance with the provisions outlined in the Indian Trusts Act of 1882.
  • None of the parties involved should be disqualified under any prevailing law in India.
  • The objectives of the trust must not contravene any existing laws in India.
  • The trustee must conduct their activities in a fair and just manner.
  • The formation of the trust should not be contrary to public interest or any other applicable laws.
  • The activities carried out by the trust must not cause harm to any individual.
  • The trust activities should align with the objectives stated in the trust deed.
  • The trust deed must be drafted appropriately, reflecting the genuine interests of the parties involved in forming the trust.
  • The trust has more than two purposes, both purposes must be valid. If one goal is reasonable and the other is invalid, the trust cannot be formed.

Contents of a Trust Deed

A trust deed is a vital document that delineates key details and provisions of a trust. It typically includes the following clauses:

  • Period or term for which the trust will remain in operation.
  • The registered office address of the trust.
  • The geographical area or region where the trust will carry out its activities.
  • The goals and objectives that the trust aims to achieve.
  • Information about the person establishing the trust (settlor) and details of the assets or property being transferred to the trust.
  • Information about the board of trustees, including their membership, qualifications, terms, and tenure.
  • The roles, responsibilities, and powers of the trustees.
  • Procedures for amending the trust deed and provisions for the closure or termination of the trust.
  • The trust deed ensures that the trust operates in accordance with the relevant laws and regulations.

The trust deed serves as a legally binding document that governs the operations and functioning of the trust, providing clarity and guidance to all parties involved.

  • Trust Deed with the respective stamp value.
  • Two photographs of the parties involved in the trust.
  • PAN cards of the individuals associated with the trust.
  • Address proof of the individuals.
  • Identity proof of the individuals.
  • Authentication from the partners (if applicable).
  • No Objection Certificate for using the premises (if applicable).
  • Any form of a utility bill as proof of address.
  • Address proof of the trust registered office.
  • 12A Registration and 80G Certificates from the respective income tax authorities to claim deductions (if applicable).


The process for applying for Trust Registration is outlined in detail below:

Name of the Trust:

Choose an appropriate name for the trust in compliance with relevant acts such as Trademarks, Copyrights Act, Intellectual Property Rights Act, and Emblems and Names Act, 1950.

Settlers of the Trust:

Determine individuals who will act as settlers of the trust. A minimum of two trustees is required, and all trustees must be residents of India.

Prepare Memorandum of Association (MOA):

Prepare an MOA outlining the objectives and purpose for which the trust is formed, ensuring legal permissibility.

Draft the Trust Deed:

Create a legally binding trust deed, outlining terms and conditions agreed upon by the author, trustees, and beneficiaries.

Submit to the Registrar:

Submit the trust deed and other required documents to the registrar, involving the author, trustees, and beneficiaries.

Obtain Certificate of Trust Registration:

Upon registrar approval, the trust is registered, and a trust registration certificate is issued. This certificate facilitates the opening of a bank account in the trust’s name.

Winding up a Trust:

Winding up occurs when trust assets are distributed lawfully to beneficiaries or a similar entity. Compliance with applicable laws and approval from the charity commissioner or court is crucial during this process.

How Bmcs Can Help:

Bmcs is dedicated to providing essential support for Trust Registration, ensuring compliance with intricate legal implications. Our experts guide you through understanding the governing provisions of Trust in India, facilitating Trust-related activities with minimal legal hassles.

Frequently Asked Questions

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To get started with BMCS India, simply reach out to us through our contact information on our website. We will be glad to schedule an initial consultation to understand your business requirements and discuss how our services can benefit you. From there, we will work together to develop a tailored plan to drive your business success.