Trusts in India

Trust

A Non Profit Organization can register in India as a Society, under the Registrar of Societies or as a Trust, by making a Trust deed. Another option can be registration as a Section-25 Company under the Companies Act, 1956.

Whether it's a trust, society or a section-25 company, the Income Tax Act, 1961 gives all categories an equal treatment, in terms of exempting their income as well as granting 80G certificates, wherein donors to non-profit organizations can claim a rebate against the donations made.

The Non-profit organizations in India

• Are present independently of the state;
• They are self-governed by a board of trustees or a managing committee comprising individuals who normally serve in a fiduciary capacity;
• Produce profits/benefits for others, who are generally outside the membership of the organization; and
• Are 'non-profit-making' and are prohibited from distributing a monetary residual to own members.

Charitable Trust

In India, trusts that are set up for social causes and approved by the Income Tax Department, not only get exemption from payment of tax but also the donors can deduct the amount of donation such trusts from their taxable income.

Legal framework in India recognizes activities like "relief of poor, medical relief, education, and advancement of object of general public utility" as charitable purposes.

Legislation

Different states in India are having different Trusts Acts in force that govern the trusts in that state. In the absence of a Trusts Act for a particular state/territory the general principles of the Indian Trusts Act 1882 are applied.

Main Instrument

For any public charitable trust, the main instrument is the trust deed, wherein the aims, objectives and mode of management (of the trust) is enshrined. Also, the minimum and maximum number of trustees has to be specified in the deed. The trust deed should always clearly spell out aims and objects of the trust, how the trust is to be managed, how other trustees should be appointed or removed, etc. The trust deed is to be signed by both - the settler/s and trustee/s - in presence of two witnesses. The trust deed is to be executed on a non-judicial stamp paper, the value of the same would depend upon valuation of the trust property.

Trustees

A minimum of two trustees are required for a Trust. There is no upper limit to the number of trustees. Trustees are comprised in the Board of Management..

Application for Registration

• The application for registration purpose should be made to the official having the jurisdiction over that region in which the trust is to be registered.
• After providing details in the form regarding the designation by which the public trust will be known, names of trustees, mode of succession, etc., the applicant needs to affix a court fee stamp of Rs.2/- on the form and pay a very small registration fee which can range from Rs.3/- to Rs.25/-, depending upon the value of the trust property.
• Applicant should sign the application form in front of the regional officer or superintendent of the regional office or the charity commissioner or a notary. The application form is to be submitted along with a copy of trust deed.
• Two other documents - affidavit and consent letter - should be submitted at the time of making an application for registration.