INTRODUCTION
A trust is a legal arrangement where a person (the trustor or settlor) transfers property or assets to another person (the trustee) to hold and manage for the benefit of a third party (the beneficiary). In India, trusts are commonly created for charitable, religious, educational, or social welfare purposes, though they may also serve private or family interests.
Trust registration is the process of legally establishing a trust under the Indian Trusts Act, 1882, which provides it with official recognition and legal standing. Registration ensures that the trust functions in compliance with statutory requirements, and it gives the trustees the authority to manage the trust property effectively.
PURPOSE OF TRUST REGISTRATION
Trusts are primarily created to serve altruistic or non-profit objectives such as:
- Advancing education, science, literature, and art.
- Providing medical relief and supporting public health initiatives.
- Offering aid to the underprivileged or promoting social welfare.
- Preserving cultural or religious heritage.
Registering a trust ensures transparency, accountability, and legal protection for both trustees and beneficiaries, while also enabling access to tax exemptions and government benefits under the Income Tax Act.
PARTIES INVOLVED IN A TRUST
A trust involves three key parties:
- Trustor / Settlor – The individual who creates the trust and transfers property or funds into it.
- Trustee – The person or group responsible for managing and administering the trust assets according to the terms of the trust deed.
- Beneficiary – The person or group for whose benefit the trust has been established.
This fiduciary relationship is based on mutual confidence and clearly defined duties outlined in the trust deed.
TYPES OF TRUSTS
Trusts in India are classified into several types based on purpose and scope:
- Private Trust – Created for the benefit of specific individuals or families. Governed by the Indian Trusts Act,
- Public Trust – Formed for charitable or religious purposes benefiting the public. Governed by various state laws, such as:
- Religious Endowments Act, 1863
- Charitable and Religious Trusts Act, 1920
- Bombay Public Trusts Act, 1950
- Public-cum-Private Trust – Serves both public and private beneficiaries, where part of the income benefits the public and the rest specific individuals.
REGULATORY FRAMEWORK
The Registrar of Trusts oversees the registration and maintenance of records for trusts in India.
- Private Trusts are governed by the Indian Trusts Act, 1882.
- Public Trusts are regulated by respective state laws, as India does not have a uniform national act for them.
- The Income Tax Act, 1961, provides tax exemptions under Sections 12A and 80G for registered charitable trusts.
LAWS GOVERNING TRUSTS IN INDIA
- Indian Trusts Act, 1882 – Governs the creation, administration, and obligations of private trusts.
- Charitable and Religious Trusts Act, 1920 – Deals with inquiries and supervision of public charitable trusts.
- Income Tax Act, 1961 – Grants tax benefits and regulates exemptions for charitable institutions.
- Societies Registration Act, 1860 – Applicable when the trust operates in parallel with societies or associations.
REASONS FOR REGISTERING A TRUST
- Ensures compliance with applicable laws and governance standards.
- Grants legal recognition and protection for trust property.
- Enables access to tax exemptions (Sections 12A & 80G).
- Builds public credibility and donor confidence.
- Facilitates efficient management and succession of trust operations.
- Promotes public welfare through regulated charitable activities.
BENEFITS OF TRUST REGISTRATION
- Legal Protection: Provides enforceable recognition under Indian law.
- Tax Advantages: Exemptions and donor deductions available for charitable trusts.
- Transparency: Establishes clear governance and fiduciary responsibility.
- Financial Support: Enables receipt of donations, grants, and funding.
- Family Wealth Management: Useful for estate planning and asset distribution.
- Public Confidence: Registered entities enjoy greater trust from contributors and regulators.
ELIGIBILITY AND REQUIREMENTS
To register a trust in India, the following conditions must be met:
- Minimum of two individuals are required to create a trust.
- Objectives must be lawful and non-commercial.
- The trust deed must clearly outline the purpose, parties, and rules.
- None of the parties should be legally disqualified.
- The trust’s activities should align with public interest and not contravene any existing laws.
ESSENTIAL CONTENTS OF A TRUST DEED
A trust deed is the foundational document for trust registration. It typically includes:
- Name and address of the trust and its registered office.
- Objectives and scope of activities.
- Details of the settlor, trustees, and beneficiaries.
- Provisions for trustee powers, meetings, and succession.
- Rules for amendments, dissolution, and dispute resolution.
- Tenure or period of trust operation (if applicable).
The deed must be executed on stamp paper of prescribed value and registered with the Sub-Registrar of Assurances.
WINDING UP OF A TRUST
A trust may be wound up or dissolved once its objectives are fulfilled or if it becomes non-functional. In such cases:
- All assets must be transferred to another trust with similar objectives.
- Approval from the Charity Commissioner or civil court may be required.
- Trustees must ensure settlement of liabilities and compliance with tax obligations