Trusts

  • Drafting of Trust Deed
  • Drafting of By-laws
  • Representation with the Registrar
  • Registration of the Deed
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What is a Trust

Trusts have not been defined under the Income-tax Act, 1961. Trusts can be broadly classified into three categories : Public trust (charitable / religious trust), Private Trust, Public cum Private trust.

Trust itself is a legal obligation, as the trustees are legally bound to apply the income of the trust in the manner and for the purposes specified by the author of the trust and it includes the following:

  1. Property of the estate of deceased held by executor(s) under a legal obligation
  2. Section 25 "companies" or "Guarantee Companies". Such companies are also holding the properties under legal obligation.
  3. Muslim Wakfs.
  4. Religious Endowments under the Hindu Law.
  5. Institutions registered under the Societies Registration Act, 1860 as the properties of the society are held under a legal obligation.
  6. Bar Councils, Chamber of Commerce, endowments, monasteries, maths, etc. are all instances where the "property is held under legal obligation".
How to create trust
The following are the requisites for creation of a Trust:
  1. The existence of the author/settlor of the Trust or someone at whose instance the Trust comes into existence and the settlor to make an unequivocal declaration which is binding on him.
  2. There must be a divesting of the ownership by the author of the trust in favour of the trustee for the beneficial enjoyment by the beneficiary.
  3. A Trust property.
  4. The objects of the trust must be precise and clearly specified.
  5. The beneficiary who may be particular person or persons.

Unless all the above requisites are fulfilled, a trust cannot be said to have come into existence.

A formal deed is not necessary to constitute a public trust, still less to constitute a legal obligation binding the trustees. In the case of a dedication to a public trust, what is essential is that there should be an unambiguous expression of intention to divest and an actual divestment of the interest of the donor for the benefit of the charity. Such divestiture can be proved by a written document or by other evidence as it is not necessary that there should be a writing to constitute a valid dedication.

Further, there are three certainties required to create a charitable trust. They are:
  1. A declaration of trust which is binding on settlor,
  2. Setting apart definite property and the settlor depriving himself of the ownership thereof, and
  3. A statement of the objects for which the property is thereafter to be held, i.e. the beneficiaries.
Mandatory Compliances
  • To get benefits of section 11 and 12 of the Income tax Act, 1961 for exemption of income of charitable trusts / religious trust - such trust or institution is registered under section 12AA ( Get Registration Certificate u/s 12AA)
  • Return to be filed under section 139(4A) on or before due date
  • where the total income without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount not chargeable to income-tax - Return to be accompanied with Audit Report in Form 10B by Chartered Accountant (Rule 17B).