A Trust is a legal arrangement where a settlor (the person creating the trust) transfers assets to a trustee (the person or entity who manages the assets) for the benefit of one or more beneficiaries. Trusts are established for various purposes, including managing family wealth, supporting charitable causes, and estate planning.

In India, trusts are primarily governed by the Indian Trusts Act, 1882, which mainly deals with private trusts. Public trusts, on the other hand, are generally governed by state-specific legislation.

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Types of Trusts in India

1. Private Trust: Created for the benefit of specific individuals or families. These are governed by the Indian Trusts Act, 1882. Private trusts can be further classified as:

   • Determinate Trust: The beneficiaries and their shares are clearly defined in the trust deed.

   • Discretionary Trust: The trustee has the power to decide how and when to distribute the trust income and assets among the beneficiaries.

   • Revocable Trust: The settlor retains the right to alter or terminate the trust.

   • Irrevocable Trust: The settlor cannot alter or terminate the trust once it's created.

2. Public Trust: Created for the benefit of the public at large or a significant section of the public (e.g., for charitable, religious, educational purposes). Public trusts are governed by various state-level acts such as the Bombay Public Trusts Act, 1950, or the Charitable and Religious Trusts Act, 1920. They can be further categorized as:

   • Charitable Trust: Established for philanthropic purposes like poverty relief, education, or medical aid.

   • Religious Trust: Set up for religious purposes, often managing temples, mosques, or other religious institutions.

3. Public-cum-Private Trust: Serves both public and private purposes, benefiting both the general public and specific individuals or families.

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Key Parties Involved in a Trust

• Settlor (Author): The person who creates the trust and transfers assets to it.

• Trustee: The individual(s) or entity responsible for managing the trust assets according to the terms of the trust deed for the benefit of the beneficiaries.

• Beneficiary: The person(s) or entity who will receive the benefits from the trust assets.

 

Registration Procedures for Trusts in India

The registration process for trusts differs depending on whether it's a private or public trust and the specific state laws applicable to public trusts.

Registration of Private Trusts (Governed by the Indian Trusts Act, 1882):

The registration of a private trust is not mandatory under the Indian Trusts Act, 1882, but it is highly advisable for legal validity and to protect the trust's assets. The process primarily involves registering the Trust Deed.

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1. Drafting the Trust Deed: This is the most crucial step. The trust deed should clearly specify:

   • The name of the trust.

   • The names and addresses of the settlor, trustees, and beneficiaries.

   • The purpose and objectives of the trust.

   • Details of the trust property.

   • The rights, duties, and powers of the trustees.

   • The management and administration of the trust.

   • The duration of the trust (if any).

   • The procedure for amending or terminating the trust.

2. Stamp Duty: The trust deed needs to be prepared on non-judicial stamp paper of the appropriate value, which varies from state to state based on the value of the trust property.

3. Registration of the Trust Deed: The trust deed, along with the required stamp duty, needs to be registered with the local Sub-Registrar of Assurances. This usually requires the presence of the settlor and trustees, along with their identity proofs and photographs. Two witnesses are also typically required to sign the deed in the presence of the Sub-Registrar.

4. Documents Required for Private Trust Registration (Generally):

   • Original Trust Deed on stamp paper.

   • Copies of the Trust Deed.

   • Identity and address proofs of the settlor and trustees (PAN card, Aadhaar card, passport, etc.).

   • Photographs of the settlor and trustees.

   • Proof of address of the registered office of the trust.

 

Registration of Public Trusts

Public trusts are governed by state-specific laws, and the registration procedures vary accordingly. Generally, the process involves:

1. Drafting the Trust Deed: Similar to private trusts, a trust deed outlining the objectives, beneficiaries (the public at large), trustees, and property details is prepared.

2. Applying for Registration: An application for registration is made to the relevant authority, which is usually the Registrar of Trusts in the respective state. The application needs to be accompanied by the trust deed and other required documents.

3. Documents Required for Public Trust Registration (Varies by State, but generally includes):

   • Trust Deed.

   • Identity and address proofs of the trustees.

   • Photographs of the trustees.

   • Proof of address of the trust's registered office.

   • In some states, an affidavit by the trustees.

   • Potentially, a scheme of management outlining the trust's operations.

4. Verification by the Registrar: The Registrar of Trusts examines the documents. They may ask for clarifications or additional information.

5. Issuance of Registration Certificate: If the Registrar is satisfied, the trust is registered, and a registration certificate is issued.

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Key Considerations for Trust Registration

• Choosing the Right Type of Trust: Determine whether a private or public trust best suits the intended purpose.

• Drafting a Comprehensive Trust Deed: The trust deed is the foundation of the trust and should be carefully drafted with clear and unambiguous terms.

• Compliance with Applicable Laws: Ensure compliance with the Indian Trusts Act, 1882 (for private trusts) or the relevant state-specific laws (for public trusts).

• Appointment of Trustees: Choose trustworthy and capable individuals to act as trustees.

• Tax Implications: Understand the tax implications for both the trust and the beneficiaries. Registered trusts can often avail certain tax benefits under the Income Tax Act.

• Professional Assistance: It is highly recommended to seek legal assistance from a lawyer experienced in trust law to ensure proper drafting and registration of the trust deed.

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Key Documents Checklist

• Trust Deed (signed and notarized)

• Identity proof of Settlor and Trustees (PAN, Aadhaar)

• Address proof of office (utility bill + NOC)

• Passport-size photos of all parties

• PAN application form for the Trust

• 12A/80G application (for tax exemption)

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 Important Notes

• Trusts cannot be converted into companies or societies

• Annual accounting and auditing are mandatory for charitable trusts

• Public trusts may require registration under state charity commissioner, depending on the location

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