Trust Registration

Overview Naming Criteria Eligibility Documents Required-Trust Documents Required-GST Advantages & Disadvantages Exemptions

Trust Registration is done in India by the Trust Act, 1882. A Trust is created for the beneficial interest of the Beneficiary. We can broadly classify trusts into two categories on this basis:

Private Trusts
Public Trusts

Where the Trust is created for the benefit of a specified person or class of persons, it is known as a Private Trust. On the contrary, where the Trust Property is administered for the benefit/enjoyment of general public or a fluctuating class of persons and not just limited to a selective group, it is known as a Public Trust. As such, a Private Trust need not be charitable or religious in nature as opposed to a Public Trust.

Naming Criteria of a Trust

Any Trust should have a name shall not be identical with or too nearly resembles the name of an existing company.

No Trust shall have a name which, in the opinion of Central Government, is undesirable or the name proposed resembles any connection with Government or State patronage, unless prior approval of the Central Government is obtained.

The name should not be such that its use by the Trust will constitute on offence under any law.

The name should not be illegal or offensive.

The name should not be misleading for the public.

Eligibility for registering a Trust

The minimum age of the person to be a Trustee should be at least 18.
A resident or citizen of India can become a Trustee.
The trustees can be natural persons or an artificial legal entity.

Minimum and maximum members of a Trust

Minimum 2 members
Maximum members can be unlimited.

Documents/Details Required for Trust Registration

Following self-attested documents of the members is required:

Two identity proof documents of Trustees – Copy of Aadhaar Card/ Voter ID Card/ PAN Card (compulsory).
Address proof (Voter ID, Passport, Driving license, etc.)
In case your own premise, ownership and sale deed and one address proof document of registered office (like water, telephone, mobile bill or copy of bank pass book or net banking statement mentioning address of the applicant).
In case the property is on rent, then you need to submit a copy of the rent agreement with NOC from Landlord.
Passport size photo of Trustees.
Occupation details, Email address, Contact details.
Trust deed.

Documents/Details Required for GST Registration of a Trust after registration

PAN card of the Trust.
PAN card and photo of settlors.
Certificate of Registration.
Details of bank.
In case of leased property, the copy of lease deed for the registered office premises along with a NOC from Landlord and electricity bill/property tax receipt/water bill copy of the registered office property.
In case of own property, copy of sale deed along with the electricity bill/property tax receipt/water bill copy of the registered office property.
Appointment Proof of authorised signatory.

Advantages

Limited liability is possible if a corporate trustee is appointed
The structure provides more privacy than a company
There can be flexibility in distributions among beneficiaries
Trust income is generally taxed as income of an individual.

Disadvantages

The structure is complex
The Trust can be expensive to establish and maintain
Problems can be encountered when borrowing due to additional complexities of loan structures
The powers of trustees are restricted by the trust deed.

Exemptions for a Trust

Income of a charitable and religious trust is exempt from tax subject to certain conditions. The exemptions are provided to the trusts under various provisions, inter-alia, Section 10, Section 11, etc. Some of the exemptions allowed to a trust are as under:

Section 11 provides exemption for income derived from property held under trust wholly for charitable or religious purposes to the extent such income is applied for charitable or religious purpose in India. However, this exemption shall be subject to certain conditions.
In view of Section 12, income in the form of voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes shall also be exempt from tax (subject to certain conditions).
Any voluntary contributions received by an electoral trust shall not be included in its total income (subject to certain conditions).
Income of an educational institute is subject to exemption under Sections 10(23C)(iiiab)/(iiiad)/(vi).
Income of a hospital or other institution shall be eligible for exemption if it satisfies the conditions prescribed under Sections 10(23C)(iiiab)/(iiiad)/(vi).