TRUST REGISTRATION SERVICES

Trust Registration Services provided at K M Gatecha & Co LLP:

• Research and finalization of Name and deed of Trust,
• Collection of Documents,
• Drafting of Trust Deed,
• Accounts and audit,
• Identification of applicable provisions and legalities,
• Availing authorization from sub-registrar,
• Completion of establishing trust,
• Obtaining PAN card,
• Obtaining TAN number,
• ITR preparation and filing.

What is a Trust?

• According to the Indian Trust Act 1882, trust is defined as a legal agreement where the trust’s owner transfers the property to a trustee or a beneficiary.
• The trustee, who is selected by the trust’s owner (grantor), is responsible for administrating the trust and distributing the assets to the designated beneficiaries.
• The common beneficiaries are heir, family members or charities.
• Trusts are normally formed to reduce taxes, simplify or avoid certain processes and safeguard assets.

Basic types of trusts:

• Public trusts,
• Private trusts,
• Public cum private trusts.

The different types of Trusts in India according to the object:

• Testamentary,
• Charitable,
• Asset protection trust,
• Revocable,
• Irrevocable,
• Special needs,
• Spend thrift.

Benefits of Trust registration:

• Charitable undertakings:
  • Charitable trusts can be formed to use the assets of the trust’s owner for own, other’s benefits and a charity.
• Tax exemption:
  • All registered trusts have access to various tax exemptions offered by the income tax department.
  • Since the object of the trust doesn’t revolve around making profits (such as the case for NGOs), they are eligible for various tax exemptions.
• Provide benefits to financial poor people,
• Minimal legal hinderances:
  • As trust are legally protected by the Indian Trust Law 1882, it prevents any other person to lay claim on the assets of the trust.
• Legal coverage of assets,
• Seamless transfer of wealth in absence of a will,
• In case of moving to another country a family can form a trust to avoid taxation in the other country.

Process of trust registration:

• Selection of name for the trust:
  • The name should be in line with the provisions of the Emblems and Names Act, 1950,
  • There should be no violation according to Trademark Act.
• Drafting the Trust Deed:
  • Should contain the following clauses:
    • Objects:
      • The basic purpose for formation of trust.
    • Acceptance of funds:
      • This clause will define and enable trust to accept donations, contributions, and subscriptions from defined sources such as person, government bodies, or charitable institutions in form of cash, cheque or immovable assets without any charges.
    • Power of trustees which defines the following powers:
      • Appointing employees,
      • Decisions regarding trust’s properties,
      • Opening bank account in trust’s name,
      • Suing defaulters on behalf of trust,
      • Accepting gifts or donations,
      • Investing additional funds.
    • Accounts and audit process,
    • Winding up process and details.

Documents required for Trust Registration services:

• Proof of identity of trust’s owner and trustee,
• Address proof of registered office,
• No objection certificate if the premises is rented,
• Trust Deed’s objective,
• Stamped trust deed with following information:
  • Number of trustees,
  • Trust registered address
  • Proposed name of trust,
  • Proposed rules,
  • Presence of settlor and 2 witnesses at the time of registration of trust.
• Trustee and settlor details (name, id, occupation etc.)
• PAN

Penalties for violation of compliances of Trust registration:

• The violation of any of the provisions of Trust Deed results in criminal and civil penalties for the defaulters,
• In the case where the trust fails to acquire a TAN number after trust registration then the penalty for the same is INR 10,000,
• The above penalty is applicable if TAN number is not quoted on payment of challans and TDS certificates,
• Penalties in case of not furnishing returns of income.