A trust may be created by:
Every person who is competent to contracts: This includes an individual, AOP, HUF, company, etc.
If a trust is to be created by on or behalf of a minor, then the permission of a Principal Civil Court of original jurisdiction is required.
Further, it also depends on the law in force that is prevailing at that particular point of time and the extent to which the author of the trust may intend to dispose of his property.
Private Trusts: A private trust is for a closed group. In other words, the beneficiaries can be identified. Eg: A trust created for the relatives and friends of the author.
Public Trusts: A public trust is created for a large group, i.e. the public in large. Eg: Non-Profit NGO’s Charitable Institutions for the general public.
Section 5 of the Act states that with respect to:
Immovable property: A private trust must be created by a non-testamentary instrument in writing. Further, the non-testamentary instrument needs to be signed by the author of the trust or the trustee and has to be registered. However, if the non-testamentary instrument is created by a will, registration is not necessary.
Movable property: A trust in relation to movable property can be declared as in the case of immovable property or by transferring the ownership of the property to the trustee. Hence, registration is not mandatory.
For a public trust, whether in relation to a movable property or an immovable property the registration is optional but always desirable. From the practical point of view, it is always advisable for charitable trusts to have a proper registered trust deed.
Registration has the following advantages:
(a). A registered Trust Deed becomes an official document which carries support and force of law.
(b). a registered deed effectuates transmutation of possession. The registration of a trust-deed, in the absence of an intention to the contrary, is enough to convey the title to trust-property to the trustee, even if the trust deed is not delivered to him;
(c). A conveyance of trust property to the trustee under a registered deed is generally not open to challenge.
(d). In case of a charitable or religious trust, in relation to an immovable property, for claiming exemption u/s. 11 of the Income Tax Act, it is essential that the instrument of trust is duly registered .
(e). When the trust deed is reduced into writing with the Registrar, it facilitates exemptions under section 80G of the Income-Tax Act for the donors. It may be noted that this is an essential requirement for the purposes of section 80G of the Income-tax Act, 1961.
(f). Under the provisions of sections 11,12,12A and 13 read with sections 60 to 63 of the Income-Tax Act, the income of charitable! religious trust is exempt from income tax subject to the fulfillment of certain conditions. Such trust institutions are entitled to exemption under the Income-tax Act when they are created or established for charitable purposes as defined under section 2(15) of the Income tax Act, 1961.
Registration of a Trust is mainly required from two angles:
Registration under State Act
Registration under Income Tax Act
Other types of registrations associated with a trust, required in certain situations, may be briefly stated as under:
(a) Registration under the Indian Registration Act;
(b) Registration under Public Trusts Act;
(c) Registration under Income Tax Act.
(c) Registration under the Foreign Contribution (Regulation) Act.
As regards registration under the Indian Registration Act, it may be noted that it is the trust-deed and notthe trust which is required to be registered. Titus, for this purpose, a trust deed has to be framed incorporating the necessary provisions for management of the affairs and objects of the trust. This deed has to be registered with the Sub-Registrar of the Registration Department of the respective State Government. Besides, a trust created by a will may also be registered under the said Act by registering the will itself.
A trust-deed should be presented for registration within four months of its execution (Sec.23), in the office of the Sub-Registrar within whose sub- district the whole or some portion of the property is situate. (Sec. 28). If a document cannot be prescribed for registration within the aforesaid period owing to urgent necessity or unavoidable accident, it may be presented for registration within a further period of four months along with a line which shall not exceed ten times the amount of registration fee (Sec. 25.). Registration fees, as prescribed by the stale Government, is payable on presentation of the document. (Sec.78).
A trust deed relating to immovable property must, for the purposes or registration, contain a description of such properly, sufficient to identify the same. (Sec$.2l & 22). If there arc any interlineations, blanks, erasures or alterations in a deed, the same must be duly attested by the person(s) executing the deed (Sec.20).
When die Registering Officer is satisfied that the provisions of the Act as applicable to the document presented for registration have been complied with, he shall endorse thereon a certificate containing die word '‘registered", together with the number and page of the book in which die document has been copied. Such certificate shall be signed, sealed and dated by the Registering Officer, and shall then be the conclusive evidence that the document has been duly registered. (Sec.60).
It may be noted dial a charitable or religious trust. whether public or private, is not required to obtain registration under the Indian Registration Act. in certain states like Maharashtra and Gujarat there is a Public Trusts Act, which obliges such institutions, trusts to get registered as such under die said Act.
For example, according to the Bombay Public Trusts Act, 1950, all charitable and religious institutions arc to be registered as Public Trusts and will come under the supervision of the Charity Commissioner of the State.
For details, the relevant state law on trusts, if any, should be consulted.
Charitable or religious trusts anti societies, claiming exemption under Section 11 and 12 of the Income-tax Act arc required to obtain registration under the Act. Private! family trusts arc neither allowed such exemption nor. thus., required to seek registration under the Income-tax Act. However, private trusts partly for charitable or religious purposes, are also eligible and should, thus, obtain registration.
Any society, trust or charitable company carrying on educational, charitable, religious, economic, cultural or social welfare activities and desirous of receiving any foreign contribution from a foreign source, is required to obtain registration under section 6(1) of the Act. Any such association which is not registered or which has been denied registration, can receive foreign contribution only alter obtaining prior permission from the Central Government under section 6(1 A) of the Act.
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It is mandatory for a trust to get the registration under section 12AB of the Income-tax Act, 1961 so as to claim exemption under Section 11.
A trust is required to apply for registration in Form No. 10A
(a) where the trust is created, or the institution is established, under an instrument, self-certified copy of the instrument creating the trust or establishing the institution;
(b) where the trust is created, or the institution is established, otherwise than under an instrument, self-certified copy of the document evidencing the creation of the trust, or establishment of the institution;
(c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;
(d) self-certified copy of the documents evidencing adoption or modification of the objects, if any;
(e) where the trust or institution has been in existence during any year or years prior to the financial year in which the application for registration is made, self certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up; note on the activities of the trust or institution;
(f) self-certified copy of existing order granting registration under section 12A or section 12AB, as the case may be; and
(g) self-certified copy of order of rejection of application for grant of registration under section 12A or section 12AB, as the case may be, if any.
Hence, corpus funds are not meant for the attainment of objectives and goals. They usually are not applied for the attainment of goals and objectives. Corpus fund is considered as capital and core of the trust or institution, which should be maintained permanently for its continuance and existence.
Corpus funds can be applied to purchasing the assets like land, building, etc. Similarly, it can also be invested or deposited as prescribed under section 11(5) of the Income Tax Act.
Corpus funds are of utmost importance from the point of view of income tax. Corpus funds represent the permanent funds maintained by any trust or institute for day to day survival and maintenance of the organization.
It is clearly mentioned under section 12; that corpus donations are totally exempt from tax liability for the trust or institution which receives such donation. However, such corpus donations have to be disclosed in prescribed return or form, in the part where the exempt income of the trust or institution is required to be mentioned.
However, the benefit of exempt corpus donations is available only for the registered institute and hence if the trust or institute is an unregistered organization, then corpus donations will not be exempt.
Income from corpus fund is not exempt, For e.g., interest on corpus fund is liable for the tax. However, such interest income can be applied to charitable purposes, which can lead to tax saving.
Trust may create corpus fund from its internal profits and surplus also. However, only 85% of income is eligible to be applied towards charitable purposes, and only 15% of income is available for accumulation and can be used for creating corpus fund by then trust or institution.
Even if any box is kept for collection with the word written as a corpus, same shall not be considered as corpus donation. Since these boxes do not receive donations along with written direction; these do not come under corpus donation.
in detail,
Any donation received through charity boxes will not be considered as corpus donation even if the donation box is marked with the word ‘corpus’. Suppose, an NGO puts a donation box with a inscription ‘all donation will be towards the corpus of the organization’, the donation so collected will not be considered as corpus donation because a specific direction from the donor has to come in writing in order to constitute a corpus donation.
Typically donations received under Sec 80G are considered as Income and reflected in the credit side of the Income & Expenditure Account. ... The Donor is eligible for 80G deduction on Corpus. While the recipient i.e. the NGO takes it to the Balance Sheet as a Corpus Fund, which is capital in nature and not as an Income.
The Donor is eligible for 80G deduction on Corpus.
While the recipient i.e. the NGO takes it to the Balance Sheet as a Corpus Fund, which is capital in nature and not as an Income.
Now if the same NGO were to donate these funds in the same financial year to another NGO as Corpus or as a simple donation, then such a donation was hitherto considered as a valid charitable expenditure which can be expensed in the Income & Expenditure account of the first NGO. This afforded an opportunity for round-tripping donations from one NGO to another with the interplay of it being expenditure and Corpus at the same time and beating around the 85% rule on utilization under Sec 11(1).
This holds practical in case of especially in the case of a charitable institution. This is because the institution may resort to this trick just to get this amount of voluntary contribution as exempt. However, without specific direction from the donor, voluntary contributions in the charity box, are not qualified as corpus donations
I ncome of a charitable and religious trust is exempt from tax subject to certain conditions. The exemptions are provided to the trusts under various provisions, inter-alia, Section 10, Section 11, etc. Some of the exemptions allowed to a trust are as under:
1) Section 11 provides exemption for income derived from property held under trust wholly for charitable or religious purposes to the extent such income is applied for charitable or religious purpose in India. However, this exemption shall be subject to certain conditions.
2) In view of Section 12, income in the form of voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes shall also be exempt from tax (subject to certain conditions).
3) Any voluntary contributions received by an electoral trust shall not be included in its total income (subject to certain conditions).
4) Income of an educational institute is subject to exemption under Sections 10(23C)(iiiab)/(iiiad)/(vi).
5) Income of a hospital or other institution shall be eligible for exemption if it satisfies the conditions prescribed under Sections 10(23C)(iiiab)/(iiiad)/(vi).
No,Indian Trust Act,1882 is not applicable every where in India.Andaman and Nicobar island, State of Jammu and Kashmir is not applicable.
Trust Deed is basically formal document which defines the outlines the terms of a trust agreement.It tell about the procedure to be followed for the the management of the trust along with procedure of appointments or removing the members.
According to Society Registration Act,1860 similar & exiting registered society is not permitted.Selecting the name of the proposed society and getting it approved by Registrar of the concerned district the first step.
The Main purpose to make Trust Registration is to enhance cultural,academic and social condition of the people,work for democracy,good governance,peace,justice and cooperation.
For certified copy of MoA & Rules and Regulation society a fees of Rs.1/- per page will be changed.Application must be contained the Name,Reg No etc.The Registrar of society must satisfied the document.
Movable property: A trust in relation to movable property can be declared as in the case of immovable property or by transferring the ownership of the property to the trustee. Hence, registration is not mandatory.
