Overview
A Trust is a legal framework in which a person (the settlor) transfers property to another (the trustee) for the benefit of a third party (the beneficiary). In India, trusts are governed by the Indian Trusts Act, 1882, and must be registered under this Act to function legally. Today, trust registration is a streamlined process, mostly handled online, with the execution of a Trust Deed being the key requirement.
Why Register a Trust?
Registering a trust in India offers various legal, financial, and operational benefits:
- ✔️ Involvement in recognized charitable activities
- ✔️ Eligibility for tax exemptions under Income Tax Act
- ✔️ Support for underprivileged communities
- ✔️ Legal protection and compliance
- ✔️ Helps in preserving family wealth or assets
- ✔️ Avoids legal disputes in inheritance or succession
- ✔️ Useful for managing international asset movements
- ✔️ Minimizes tax liabilities in estate planning
- ✔️ Efficient management and control of assets
Key Parties in a Trust
- Settlor/Author: The person who creates the trust and transfers assets
- Trustee: The person or group who manages the trust property
- Beneficiary: The individual(s) or group(s) who benefit from the trust
Types of Trusts in India
1. Private Trust
- Created for specific individuals
- Governed by the Indian Trusts Act, 1882
- Can be formed through a will or deed
2. Public Trust
- Established for charitable or religious purposes
- Not governed by Indian Trusts Act but by other applicable laws like:
- Charitable Endowments Act, 1890
- Religious Endowments Act, 1863
- Bombay Public Trust Act, 1950
3. Public-cum-Private Trust
- Dual purpose: Benefits public and specific private individuals
4. Other Classifications
- Simple Trust: Trustees have passive responsibilities
- Special Trust: Trustees carry out specific roles
- Express Trust: Intentionally created by will or deed
- Implied Trust: Created by conduct or implied intent
- Investment Trusts: For mutual funds or venture capital (regulated by SEBI)
Documents Required for Trust Registration:
Here’s a checklist of the essential documents needed:
- Aadhaar Card / Passport / Voter ID / DL of Settlor and Trustees
- Address proof of the registered office (property tax receipt, utility bill)
- No Objection Certificate (NOC) from the property owner if rented
- Passport-sized photographs of the Settlor and the Trustees
- PAN cards of the Settlor and Trustees
- Trust Deed (prepared on stamp paper)
- Clearly stated objectives and activities of the trust
Contents of a Trust Deed
A Trust Deed legally establishes the trust and includes:
- Name and address of the trust
- Total number and names of trustees
- Purpose and objectives of the trust
- Registered office address
- Rules for managing the trust
- Signatures of the settlor and at least two witnesses
- Procedures for appointment/removal of trustees
Step-by-Step Process of Trust Registration in India:
Step 1: Choose a Unique Name
Ensure the name is not restricted under the Emblems and Names Act, 1950.
Step 2: Decide Settlor and Trustees
- Minimum 2 trustees required
- Settlor is usually not a trustee
- Settlor must be an Indian resident
Step 3: Draft Trust Deed and Memorandum
- Trust Deed: Legal document outlining trust terms and conditions
- MOA: Details the objectives and relationships between parties
Step 4: Prepare the Trust Deed on Stamp Paper
- Stamp value depends on the trust’s property valuation (varies by state)
- Pay required fees (usually ₹1100 – ₹100 for registration and ₹1000 for certified copy)
Step 5: Submit the Trust Deed to the Registrar
- The settlor signs all pages of the deed
- The settlor and two witnesses must be present with ID proofs
- Trustees’ physical presence is optional in most cases
Step 6: Collect Certificate of Registration
- The registrar keeps the deed copy and returns the certified original
- The Trust Registration Certificate is typically issued within 7 working days
Penalties for Non-Compliance
Failure to comply with trust regulations may lead to the following penalties:
- Civil & Criminal Charges under IPC Sections 405–409 for breach of trust
- ₹10,000 penalty under Section 272BB for failure to apply for TAN
- Penalties for failure to file Income Tax Return (ITR) under the Income Tax Act
Impact of Section 12AB – New Mandate
Trusts already registered under:
- Section 12A
- Section 12AA
- Section 10(23C)
- Section 80G
…must re-register under Section 12AB to continue availing tax exemptions.
Is ITR Filing Mandatory for Trusts?
Yes. Trusts must file Income Tax Returns electronically, either:
- With a digital signature
- Or using Electronic Verification Code (EVC)
Trusts that fall under audit requirements (Section 44AB) must file ITRs digitally with signatures.
Final Thoughts
Trust Registration in India is not only a legal requirement for operating a public or private trust but also a critical step to gain public confidence, tax benefits, and protect the trust’s long-term goals. Whether you’re setting up a charitable organization or looking to manage family assets, a well-drafted Trust Deed and timely registration provide a solid foundation.
Need Professional Assistance?
Let our experts handle your trust registration process end-to-end—right from document preparation to getting your certificate issued.
📩 Reach out today for a free consultation.