Registering a trust involves the formalisation of the trust deed, which is a legal agreement between the settlor and trustee, through the registrar of the relevant jurisdiction. The trust acts as a legal way responsible for the legitimate allocation of the settlor’s assets to the designated beneficiaries. The trust becomes operational once the registrar grants approval to the trust deed. In this article, we shall discuss how to get trust registration in India.
Understanding Trust in the Indian Context
In the Indian legal framework, the concept of trust holds significance and is regulated by the Indian Trust Act of 1882. This legislation governs all registered trusts within the country and establishes the necessary legal provisions for their functioning.
Diverse Types of Trusts
India recognises several distinct types of trusts, each serving specific purposes:
- Revocable Trust: This type of trust can be altered or revoked by the trustor during their lifetime.
- Testamentary Trust: Created through a will, this trust comes into effect upon the trustor’s demise.
- Irrevocable Trust: Once established, this trust cannot be modified or revoked without the beneficiaries’ consent.
- Charitable Trust: This trust is dedicated to charitable or philanthropic purposes, benefiting the society at large.
- Asset Protection Trust: Designed to shield assets from potential risks or creditors, ensuring their preservation.
- Special Needs Trust: Tailored to cater to the requirements of beneficiaries with specific needs or disabilities.
Benefits of Trust Registration in India
Trust registration in India offers a range of advantages that can significantly impact an individual’s or organisation’s financial security and legacy. The key benefits include:
1. Asset Protection:
Trust registration serves as a protective shield for your assets against potential risks like lawsuits, creditor claims, and economic downturns. Placing assets within a trust structure can minimise losses during unforeseen circumstances.
2. Succession Planning:
Trusts are invaluable tools for effective succession planning. By transferring assets into a trust, you can stipulate precise instructions for asset distribution to beneficiaries, ensuring a smooth transition of wealth and resources.
3. Charitable Endeavors:
Charitable trusts enable individuals to contribute to philanthropic causes and create a positive impact on society. Contributions to registered trusts not only support social initiatives but also offer tax benefits to donors.
4. Continuity and Perpetuity:
One of the most notable advantages of trust registration is the ability to establish a lasting legacy. Trusts can endure indefinitely, allowing you to ensure the continuation of your objectives and values beyond your lifetime.
Checklist for Trust Registration in India
When starting the journey of registering a trust online in India, it’s essential to follow a structured checklist to ensure a smooth and lawful process. Mentioned below is the essential checklist for trust registration in India:
1. Drafting the Trust Deed:
The initial step for trust registration in India involves preparing a trust deed, a legal document outlining the trust’s framework, objectives, and regulations.The trust deed should be executed on an appropriate non-judicial stamp paper, the cost of which can vary among different Indian states.
2. Stamping the Trust Deed:
For trust registration in India, the trust deed needs to be stamped as per the applicable stamp duty charges, which differ across various states in India.
3. Valid Objectives:
The trust must have a legitimate and lawful purpose for its creation. The objectives should align with legal requirements and societal welfare.
4. Determining Beneficiaries:
Further, for trust registration in India, based on the type of trust being formed, beneficiaries need to be clearly identified. Beneficiaries can be the general public or specific private individuals, as dictated by the trust’s purpose.
5. Minimum Number of Trustees:
For trust registration, a trust in India typically requires a minimum of two trustees.
6. Non-Governmental and Non-Profit Entity:
A crucial characteristic of trust registration is that it is a non-governmental and non-profit entity. The primary purpose should be centered around public welfare, not personal profit.
7. Stamped Trust Deed:
The trust deed, in addition to being drafted and signed, must also be properly stamped to make it legally valid. The stamping process involves paying the requisite stamp duty.
8. Compliance with State Laws:
Ensure that all the steps taken for trust registration adhere to the specific regulations and requirements of the state in which the trust is being registered.
9. Documentation and Records:
Maintain accurate records of all documents submitted and steps taken during the registration process. This documentation serves as evidence of the trust’s legality.
10. Filing and Registration:
Once all prerequisites are met, the trust registration application, along with the trust deed and other necessary documents, should be filed with the appropriate authority for official registration.
Documents Required for Registration of Trust in India
The following provides a comprehensive list of documents required for trust registration:
Documents of the Trustee & Settlers of the Trust:
- PAN card copies of all Trustees & Trustors
- Identification proofs (such as Aadhar card, passport, etc.) of all Trustees & Trustors
- Address proofs (like utility bills, rental agreement, etc.) of all Trustees & Trustors
- Coloured photographs of all Trustees & Trustors
Documents of the Business Premises:
- No Objection Certificate (NOC) from the owner of the premises where the trust will operate
- Proof of the registered business address, which could include utility bills or other valid documents
- Copy of Property Registration for the business premises
Procedure for Trust Registration in India
The process of applying for trust registration in India involves several critical steps, as outlined below:
1. Name of the Trust:
Select an appropriate name for the trust that adheres to the regulations of relevant acts like Trademarks, Copyrights Act, Intellectual Property Rights Act, and Emblems and Names Act, 1950.
2. Settlers of the Trust:
Identify the individuals who will serve as the settlers of the trust. Here, a minimum of two trustees is required.
3. Prepare a Memorandum of Association for the Trust:
Craft a Memorandum of Association that clearly outlines the trust’s objectives and purpose. It’s essential to ensure that the objectives stated in the MOA are legally permissible and in line with the intended trust activities.
4. Draft the Trust Deed:
Create a comprehensive trust deed, a legally binding document that establishes the trust’s structure and operations. The trust deed should encapsulate all the terms and conditions agreed upon by the trust’s creator, trustees, and beneficiaries.
5. Submit the Deed to the Registrar:
Submit the drafted trust deed to the appropriate registrar along with other required documents. This step involves the active participation of the trust’s creator, trustees, and beneficiaries.
6. Obtain Certificate of Trust Registration:
Upon a thorough review of the submitted documents and their compliance with legal requirements, the registrar will grant trust registration if everything is in order. A trust registration certificate will be issued, which the trustees and the trust’s creator should retain for official records. This registration certificate is pivotal as it allows the trust to open a bank account in its name, enabling financial operations.
Final Thoughts
The process of obtaining trust registration in India involves several key stages. It begins with selecting an appropriate name for the trust and identifying the settlers who will form the core of the trust. Crafting a Memorandum of Association that outlines the trust’s objectives and ensuring legal compliance is crucial. The creation of a comprehensive trust deed that defines the trust’s structure and responsibilities follows. This trust deed, along with other necessary documents, is then submitted to the registrar for review who grants a certificate of trust registration, enabling the trust to operate officially.
Trust registration offers a range of benefits, including asset protection, tax advantages, privacy, succession planning, charitable opportunities, and continuity. By comprehending the complexities of trust registration and fulfilling the necessary requirements, individuals and organisations can establish a secure and purpose-driven legal entity in India.
