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Trust Registration

What is a Trust ?
A trust is a convenient method whereby a limited number of persons may hold property on behalf of other persons, who may be a large or fluctuating body or who may include persons not yet born. Once the property has been vested in the trustees, they own the property, but they are compelled by law to exercise their ownership for the benefits of the beneficiaries and for them only. It means that legal ownership vests in the trustee or trustees but beneficiaries have de facto ownership.

A Trust is a closer system of a registered body with limited membership. It can be a family trust or a public trust. Election of office-bearers is not compulsory.

Formation of the NGO as Trust
Groups of individuals can also deliver goods to society by forming public charitable trusts. The concept of the trust is generally involving endowment of some property for public utility under certain norms. However, of late, the practice of establishing family or public charitable trusts by sparing certain cash amount for charitable, welfare or religious purposes have also come into vogue. As compared to registered societies, the set up of the trust is not open having a tendency to keep its membership limited and form byelaws suiting to the needs of the trustees (not necessarily on democratic lines); there is also minimum interference of the authorities in its functioning.

Indian Trust Act, 1882 governs private or family trusts although various states have also enacted their own trust acts, for example The Maharashtra Trust Act; Bombay Public Trust Act, 1950 Punjab Trust Act; Bombay Public Trust Act, 1950; Madhya Pradesh Public Trust Act, 1951; Rajasthan Public Trust Act, 1959; etc. Therefore, before registration of an NGO as trust the provisions of applicable trust act should be studied by the promoters to suit their needs. Normally the trusts are created by dedicating some property to a charitable purpose, however, some cash fund may also be spared by the trust or trustees for charitable purpose while creating a trust.

The main instrument of declaring a trust is the Trust Deed, which should be made on non-judicial stamp papers pf, prescribed fee and signed by the trustee or trustees for submission to the Registrar concerned. In case of trust the registrar or sub-registrar having authority to register properties has the authority to register the Trust Deed. Therefore, Trust Deed of the proposed Trust may be registered with Tehsildar, or registrar properties and endowment at the district collectorate. In metropolitan cities separate offices of registrar of properties and endowments do function.

The Trust Deed should contain name(s) of the author(s), settler(s) of the trust; the name(s) of the trustee(s); the name(s) if any, of the beneficiary/ies or whether it shall be public at large; name of the trust; address of the trust; objects of the trust; procedure of appointment, removal or replacement of a trustee, their rights, duties and powers, etc; the mode and method of determination of the trust etc.

The trust Deed in duplicate should be submitted for registration along with proof of addresses of the author(s)/settler(s)/trustee(s) of the trust. The author(s)/settler(s) or all the trustees should sign on all the pages of the Trust Deed before the registrar. If required passport size photos of each of the signatory should also be pasted on the Trust Deed. The registrar is likely to verify credentials of the applicants and check the proof of address, photographs, proof of the registered office, etc.

After completion of the formality a nominal fee will be charged by the registrar (excluding the stamp duty) and after making due marks and signature of the registrar the original copy of the trust Deed will be handed over to the authorised person. For any subsequent amendments in the name and objectives of the registered trust, registration of supplementary deed with the registrar concerned would be required.

Definition of Charitable Trust
The The Indian Trusts Act, 1882 defines a Trust as an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner..

• Author of Trust – The person who reposes or declares the confidence is called “the author of the trust”
• Trustee– The person who accepts the confidence is called the “trustee”.
• Beneficiaries – The person for whose benefit the confidence is accepted is called the “Beneficiaries”
• Trust property – The subject matter of trust is called “Trust property” or “Trust Money”.
• Instrument of Trust – The instrument, if any, by which the trust is declared is called the “Instrument of Trust”.

How to Form a Charitable Trust
A Trust is the obligation or responsibility placed on one in whom confidence or authority is place; it is a confidence reposed in a person by conveying to him the legal title to property which he is to hold for the benefit of others. Therefore, the “Trustee” responsibility includes protection of rightful ownership in the Trust property, the preservation of the Trust property and channelising the income from the Trust property in accordance with the intentions of the creator of the Trust. In this article, we look at the procedure for forming a Charitable Trust in India

Public charitable trusts are designed to benefit members of an uncertain and fluctuating class. There is no central law governing public charitable trusts, although most states have "Public Trusts Acts." A public charitable trust must register with the office of the Charity Commissioner having jurisdiction over the trust (generally the Charity Commissioner of the state in which the trustees register the trust) in order to be eligible to apply for tax-exemption.

Procedure for Registration of Trust under the Indian Trusts Act 1882
1. Before you register your trust you will need to decide the following:
a) Name of the trust
b) Address of the trust
c) Objects of the trust(charitable or Religious)
d) One settler of the trust
e) Two trustees of the trust
f) Property of the trust-movable or immovable property (normally a small amount of cash/cheque is given to be the initial property of the trust, in order to save on the stamp duty).
2. Prepare a Trust Deed on stamp paper of the requisite value (8% of the value of property of the trust in Delhi. The rate varies from state to state)
3. Requirement for registration of Trust Deed with the Local Registrar under the Indian Trusts Act, 1882:
a) Trust Deed on stamp paper of requisite value (as stated on point no.2 above)
b) One passport size photograph & copy of the proof of identity of the settler
c) One passport size photograph & copy of the proof of identity of each of the two trustees.
d) One passport size photograph & copy of the proof of identity of each of the two witnesses.
e) Signature of settler on all the pages of the Trust Deed
f) Witness by two persons on the Trust Deed.
4. Go to the local registrar & submit the Trust Deed, along with one Photocopy, for registration. The photocopy of the Deed should also contain the signature of settler on all the pages. At the time of registration, the settler & two witnesses are required to be personally present, alongwith their identity proof in the original.
5. The Registrar retains the photocopy & returns the original registered copy of the Trust Deed.

Trust Deed
A Trust can be formed by words or act and there is no requirement for a Trust Deed. However, a Trust Deed is desirable and required in some cases. When a private Trust pertains to an immovable property a written and executed trust deed is essential and shall also required to be registered except where the Trust is created by a will. In case of public Trust for immovable property, a written Trust deed is not mandatory but desirable. In relation to Trusts for movable property (public or private), a simple delivery of possession with a direction that the property be held under Trust, is sufficient; it requires no document or registration.

Formation of the NGO as Trust
Groups of individuals can also deliver goods to society by forming public charitable trusts. The concept of the trust is generally involving endowment of some property for public utility under certain norms.

Formation of the NGO as Trust
The procedure for forming a public Trust differs from that of private Trust, since they are governed by different laws. Creation of a public Trust is governed by the General law; whereas the creation of a private Trust is governed by the Indian Trusts Act. A public charitable or religious institution can be formed either as a Trust or as a Society or as a Section 8 Company. It generally takes the form of a Trust when its is instituted or formed primarily by one or few persons only. In this guide, we only cover the procedure for forming a private Charitable Trust.

Eligibility: In general, trusts may register for one or more of the following purposes:
1) Relief of poverty or distress.
2) Education.
3) Medical relief.
4) Provision for facilities for recreation or other leisure -time occupation (including assistance for such provision), if the facilities are provided in the interest of social welfare and public benefit.

No national law (except the broad principles of the India Trusts Act 1882, which governs private trusts) governs public charitable trusts in India.
Although many states (particularly Maharashtra, Gujarat, Rajasthan, and Madhya Pradesh) have Public Trusts Acts.

A trust needs a minimum of two trustees; there is no upper limit to the number of trustees. The Board of Management comprises the trustees.

Main Instrument:
The main instrument of any public charitable trust is the trust deed, wherein the aims and objects and mode of management (of the trust) should be specified.

1) Are foreigners allowed as members of the trust ?
Ans. -There is no apparent bar on the foreigners becoming a trustee of trust.

2) Will there be subsequent problems if foreigners are the trustees?
Ans. -It is difficult to get FCRA registration if foreigners are there as trustees. Normally, FCRA registration is not granted to such organisations. The FCRA is silent in this regard but FCRA authorities confirmed that FCRA registration is not given if foreigners are its subscribers/members/ trustees. We did come across instances of organisations being given FCRA registration inspite of having foreigners as board members/trustees. But these are exceptions and we have to assume that FCRA registration will not be given, unless the foreigners involved are too distinguished and intervention of higher authorities is availed.
The difficulties involved in getting FCRA permission for Ngo's having foreigners as trustees is a deterrent for foreign Ngo's contemplating the option of floating an Indian Ngo. Therefore, foreign Ngo's should explore other legal and legitimate way of controlling an Indian Ngo.

3) Can foreigners be inducted as ex-officio or nominated trustees?
Ans. -There should not be any problem in having foreigners as ex-officio or nominated trustees. The trust deed can be suitably drafted so as to have Ex-Officio directors or nominated trustees.

4) After registration, how long a trust can exist ?
Ans. -The registration as a trust provides perpetual existence. A trust will cease to exist if the subject mater of the trust is totally liquidated. A trust cannot be revoked once it is legitimately created.

5) Can a Public Charitable Trust Indian have activities outside India?
Ans. -The various acts under which an Ngo can be registered do not prohibit activities outside India. The FEMA and FCRA are silent in this regard and under the liberalized regime of RBI, current account transactions are allowable without any prior permission. Therefore, there should not be any problem in transfer of foreign exchange,subject to the guidelines of FEMA. The most important legislation in this context is the Income Tax Act, which under section 11(1)(c) prohibits the activities of Indian Ngo outside India without specific permission of the CBDT. An Indian Ngo spending money on activities outside India will be subject to income tax on that portion of its income

6) What are the annual returns that a Trust is required to file with the Registrar ?
Ans. -A trust is not regulated by any authority therefore, no annual returns are required to be filed with the registering authority. However, trust has to file annual returns as required under FCR Act, 1976 and Income Tax Act, 1961.

7) Who can form a trust?
Ans. -Every person competent to make a contract and competent to deal with property can create a Trust. Besides individuals, a body of individuals or an artificial person such as an association of persons, an institution, a limited company, a Hindu Undivided Family through its Karta can also form a Trust. For all practical purposes, two or more individuals are required to form a charitable trust.

8) How to form a `Trust'?
Ans. -a) A trust can be formed as per Section 4 of Indian Trust Act 1982 for a lawful purpose;
b) A trust should have a document written and signed by trustees or a sole trustee;
c) A trust can be formed through a will also;
There is no definite form to create a trust. Objectives of the trustee should be clear and unambiguous;

9) What are the purposes for which a trust can be formed?
Ans. -Trust cannot be formed for the following purposes under Sec.4 of the Act:
a) Unlawful purposes;
b) Against provisions of Indian Trusts Act 1932 rules made there under;
c) If there are provisions for cheating etc. in the trust;
d) If the trust is intended to cause loss or damage to one's property

10) Who can form a trust?
Ans. -The following can form a trust under Sec.7 of the Indian Trusts Act 1882:
a) A person capable of making contract can form a trust;
b) Trust can be formed on behalf of minor with permission of Civil Court.

11) What is the stamp duty to be paid for a trust deed?
Ans. -1. Rs.500/- if only money is contributed by the author of trust or if immovable property is conveyed where in the author remains as the sole trustee.
2. Same duty as conveyance if the immovable property is conveyed and the author is not a trustee or a sole trustee.

12) What is the fee for registration of trust deed?
Ans. -As per Article III of table of fees under Registration Rules 1965, fee shall be paid at 1 percent on the total of value shown by the trustee or value of movable or immovable property shown in the trust deed.

13) What are the differences between `Trust' and `Society' registered under Societies Registration Act 1860?
Ans. -

Society Trust
District Registrar and Registrar of Societies is competent authority to register, Charity Commissioner Trust deed can be registered in Office of the Sub Registrar.
Aims and objectives are for the development/welfare of the whole society without restriction There are two kinds of Trusts. Public and Private. The latter is a private trust for the beneficiaries.
Minimum of 7 persons are required to form Society. Any body can form Trust without restriction as to the number of persons.
Executive committee runs it. Managing trustee runs it.
Executive committee manages, subject to approval of general body. Management is under the control of management of Trustees and Managing Trustees.
Accounts shall be filed to the Registrar of Societies. Does not apply.
There is provision to admit members. Does not apply.
In order to cancel an association action can be taken only after enquiry under Sec.27 Author of Trust can cancel Trust if he so wishes. If the provision is made in the deed.
Profit cannot be distributed among the members. It can be used only for development of society. Trustees cannot share. Beneficiaries may be allowed to use the profit.

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