By transferring property to a Trustee, the owner, Trust, or Trustees benefit from the transfer. In Indian trust law, the Indian Trust Act of 1882 establishes the legal framework for Trusts. The Trust or a proclamation that the property should be held by the Trustee for the Trust’s beneficiaries transfers the property to the Trustee for the benefit of the Trustee’s beneficiaries. In India, trust registration is recommended in order to benefit from the benefits it offers. Listed below are the two categories in which trusts are classified in India;
- An Indian Public Trust can be classified into two types: Public Religious Trusts and Public Charitable Trusts. The public may be a beneficiary of a Public Trust.
- Generally speaking, a Private Trust is one that has individuals or families as beneficiaries. Private Trusts can also be classified into the following types:
- The beneficiaries and requisite shares of a private trust are easy to determine.
- In a private trust, it is difficult to determine who is the beneficiary or how many shares are required.
The benefits of registering a trust in India
- By providing much-needed financial assistance to the needy and the masses, the registered Trust operates as a charity.
- An income or capital trust may benefit the settler, beneficiaries, and Trust assets by providing better protection from a more stringent tax law.
- A frivolous claim could jeopardize the Trust’s legal standing, and it is prohibited under the Indian Trusts Act of 1882.
- In case a family relocates to a new country, it makes sense to set up a Trust to avoid paying taxes in the new country, protecting the family’s assets and allowing for better organization
Registration of Trusts in India: Documents Required
- Proof of identity can be provided by Aadhaar cards, voter identification cards, passports, and DLs. Proof of Registered Office could be provided by a property certificate or utility bill.
- In the case of rented property, the landlord must certify that no objections have been raised.
- Trust deeds contain information about the trustee and settlor, such as their identity and address, their work experience and proof of their identity.
- Accurate stamp value on trust deed.
- Trustees’ and settlor’s photos.
- Trustees’ and settlors’ PAN information.
- Trust deeds must include the following information:
- A list of the Trustees and the address where the Trust is registered
- Name proposed for the trust.
- Proposed rules for the Trust.
- Two witnesses and the settlor must be present at the time of registration of trust deed
- After registration, the Trust must comply with the following requirements:
- IT (Income Tax) filing annually.
- (If applicable) GST registration.
- Establishment License – (If employment is needed).
- The bookkeeping and accounting professions.
- (If applicable) Registration as a professional tax advisor.
In India, FAQs on Trust Registration
In what ways can trusts be registered?
A A trust deed can be used to establish a trust. Public trusts and private trusts can be established in India.
2. Why is Trust so important?
Inheritance and estate taxes can be avoided or reduced by creating trusts, which provide legal protection to the Trustor’s assets and ensure that they are delivered properly to the beneficiaries.
What is the process for setting up an income tax trust?
To gain registration under section 12A, the IT department site provides Form 10A for the Registration of Charitable or Religious Trusts.
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