In India, both societies and trusts are common legal forms for carrying out social, charitable, religious, educational and cultural activities. Though these two entities seem identical at first glance, they differ in many respects regarding legal, governance and structure framework. Knowing details about society vs trust registration in India is important for individuals and organisations to establish a legal entity that suits their needs and requirements. In this article, we will discuss the concept, importance and point out differences between society vs trust registration.
Society Registration: Meaning
Society registration is a legal practice by which a group of individuals form a non-profit organisation for an objective including literary, charitable or scientific purposes. In India, Societies are registered under the Societies Registration Act, 1860 or under respective state laws.
Trust Registration: Meaning
Trust registration is the legal procedure for creating a trust (literally a gift out of the settlor) whereby a person (the trustee) transfers ownership of some assets or properties to another party (the beneficiary). In India, Trusts are mainly governed by the Indian trusts Act, 1882 and therefore are registered with the Office of the Sub-Registrar or Charity Commissioner’s Office.
Society Vs Trust Registration in India
Here is a brief overview on society vs trust registration in India:
Laws Involved:
Societies are primarily governed by state law – generally the Societies Registration Act, 1860 or other state-specific acts. These laws regulate the registration process, rules and regulations governing the formation and functioning of societies.
Trusts are governed by the Indian Trusts Act, 1882 (a central Indian legislation). Some other laws apply to trusts too, depending on their activity and nature.
Registration Process:
Society registration is usually done at the state level with all the application and supporting documentation going to the Registrar of Societies or equivalent authority. The registration process involves drafting and submitting the society’s bylaws (memorandum of association and rules and regulations) and other documents.
Based on the trust and the state, trust registration can be via the Office of the Sub-Registrar or the Charity Commissioner’s Office. In terms of society vs trust registration, there comes a registration process for trust which involves drafting and submitting the trust deed, which includes the trust objectives, beneficiaries and management structure.
Liability and Ownership:
In a society, members are usually only liable for unpaid membership fees or subscriptions. The society itself is a legal entity separate from its members and can obtain property in its very own name.
In a trust, the trustees possess the legal title to trust property but have no beneficial interest in that property. The beneficiaries are the actual owners of the trust assets and also get the benefits outlined in the trust deed.
Taxation & Compliance:
Societies must generally file annual returns and audited financial statements with the Registrar of Societies. They might also be liable for income tax due to their activities and income sources.
Trusts must file annual returns, keep proper accounts and follow certain Tax provisions under the Income tax Act. Certain tax exemptions or concessions may be available to trusts carrying out charitable or religious activities if the conditions are met.
Applicability and Suitability:
Societies generally suit organisations or groups that involve collective effort and democratic decision-making such as clubs, associations, unions or cooperative societies.
For charitable, religious or philanthropic purposes, trusts are more appropriate since the management and distribution of assets or resources is left to trustees for specific beneficiaries or causes.
Society vs Trust Registration: A Quick Overview
Here is a table summarising Society vs Trust Registration in India:
| Aspect | Society | Trust |
| Legal Framework | Governed by state laws, typically the Societies Registration Act, 1860 or state-specific acts. | Governed by the Indian Trusts Act, 1882 (central legislation) and other applicable laws. |
| Registration Process | Done at the state level with applications and documentation submitted to the Registrar of Societies. | Registration can be done via the Office of the Sub-Registrar or the Charity Commissioner’s Office, involving the submission of a trust deed. |
| Governance & Management | Governed by a general body and an elected governing body/committee. | Administered by a board of trustees selected by the settlor, who control and administrate the trust’s activities and assets. |
| Liability & Ownership | Members are usually only liable to the extent of unpaid fees or subscriptions. The society is a legal separate entity. | Trustees own the legal title to the trust property but have no beneficial interest. Beneficiaries are the true owners of the assets. |
| Taxation & Compliance | Must file annual returns and audited financial statements. May be liable for income tax. | Must file annual returns, keep proper accounts and follow tax provisions. Tax exemptions may be available for charitable trusts. |
| Continuity & Succession | Can exist beyond the lifetime or membership of founders or current members. | Have a limited life based on the terms outlined in the trust deed. |
| Applicability & Suitability | Suitable for organisations involving collective effort and democratic decision-making. | Suitable for charitable, religious or philanthropic purposes where management and distribution are left to trustees. |
How to Choose Between Society vs Trust Registration in India
The society vs trust registration in India should be understood by individuals and organisations looking to form a legal entity in compliance with their particular goals, objectives and governance structure. Failure to recognise these difference between societies vs trust registration could cause unintended consequences, legal problems and misalignment with the intended goal of the organisation.
The reasons for knowing and learning about society vs trust registration include the different legal frameworks and compliance requirements that apply to them. Societies have state laws and Trusts are governed by the central Indian trusts Act, 1882.
Each legal structure has its very own rules, laws and reporting obligations. The wrong entity type could lead to non-compliance, possible penalties and legal liabilities that could affect the organisation’s operation and legitimacy.
Furthermore the governance and management structures of societies and trusts vary significantly. Societies are governed by a democratic process, with people exercising equal rights and participating in decision making at general body meetings and elected executive bodies. Trusts, though, are administered by appointed trustees with fiduciary duties to administer the trust’s activities and assets under the trust deeds. Understanding these governance issues is important for organisations to increase transparency, accountability and conformity with their intended decision making processes.
The choice between registering as a society or a trust also involves liability and ownership. In a society, members are liable only for unpaid membership fees or subscriptions and the society may acquire and hold properties. In contrast, trusts have assets legally owned by trustees with beneficiaries having the beneficial interest. Not understanding these could cause conflicts or misunderstandings about asset ownership and liability.
Moreover, the tax implications and eligibility for exemptions or concessions vary between societies and trusts. Trusts doing religious or charitable activities might be entitled to certain tax advantages under certain conditions and societies might have various tax obligations based on their activities and income sources. Knowing these tax implications is important for compliance and maximising potential financial benefits.
Finally, the continuity and succession of these entities is important for society vs trust registration. Societies exist for life with management and membership transitions whereas trusts have a limited life time as defined by the trust deed provisions.
Final Thoughts
Understanding the society vs trust registration in India is essential for legal compliance, effective governance, tax optimisation and overall alignment with the organisation’s goals and objectives. Understanding these distinctions might help people and organisations form a legal entity that best serves their intended purpose and long-term objectives.
While both societies and trusts have their specific characteristics and legal frameworks, registering as a society or trust ultimately depends on the goals, objectives and governance structure that the individuals or organisations seek. Seek professional legal advice from StartupFino regarding the implications and suitability of each option before completing the registration process.
