A Trust has some Importance in society. It is also called a charitable trust which is established to serve the society. The trust is defined under IRS (Internal Revenue Code Section) 4947 (a) (1). It says that it is not tax-exempt and unexpired assets are used for charitable purposes. The contribution deduction is allowed under a specific section of the Internal Revenue code. A Trust allows you to donate immensely. This blog explains the rules of Trust registration, documents needed, procedures of Trust registration, objectives of Trust, Who can form the Trust, the types of Trust, and its detailed view.
Importance of Trust registration Rules
Trust contains the author, trustee and beneficiary. The person who is having immense wealth and who is going to start a trust is called the author or the founder.
The person who manages the property is called the trustee.
A person who gets the benefits out of it is called the beneficiary.
The trust is of two types. They are Private and public trust. If the beneficiary is defined it is called private trust. If the beneficiaries are not defined then they are termed as a public trust.
Rule of trust includes a major concept called Trust deed. The Trust deed should contain the name of the trust, its objective, the names of the trustees, their duties, and their responsibilities. PAN is important for Trust registration.
The rules associated with trust shall be enforced by the attorney general and the representatives for the operation of a charitable trust in the state.
A trustee within two months of gaining control over the possession should file with the attorney general for the title, power, and duties. When the trustee is gaining the money from the public within 6 years of time should file a certified audit with a balance sheet.
Complete details of the transactions which consist of the trustee, and employees should accompany the annual periodic report. The trustee will be granted a suspension from filing annual periodic reports. This can be given in a written application. This is followed by the investigations. Either the attorney general or the assistant attorney general may hear the information. The records will also be investigated.
Documents needed
The documents of Trust registration includes,
- Identity proofs like voter ID, driving license, Aadhar card, and the passports of two members. It also should include two photographs, copy of id proof and address proof like EB or water bill of the settlors, and witnesses.
- In the case of a rental building, the NOC from the landlord.
In case you are registering under Trust Act 1882, you should provide a schedule (application of registration with court fee), trust deed, the declaration signed by settlor, letters signed by the trustee, and the above said documents.
Procedure for Trust registration
The primary step in trust registration is the Trust deed should be drafted. The deed has some importance in trust.
Secondly draft the name, address of the trustor and trustee, objectives, rules and regulations of the Trust, tenure of the trustee (minimum one to five years).
The name selection is an important aspect in Trust registration. You have to provide three names on a preferential basis.
Then the Trust should be registered.
After registering the Trust you should apply for the PAN, TAN, and the bank account.
Objectives of the Trust
- The main Importance of the charitable fund is to give away the donations to many organizations to carry out charitable activities.
- To maintain homes for aged, physically, and mentally challenged people.
- For grant help and to maintain the victims of natural calamities.
- To grant help for people during a pandemic outbreak.
- To construct, maintain the cemeteries.
- To grant money and help for the refugees.
- To accept donations from the public.
- To borrow secure payment and to lend the money.
- To help in education.
- To offer help for medical institutions.
Who can form a Trust?
A person with a service mind can form the Trust. He can create the Trust, with his own money and can appoint two or more trustees. He has the Importance in a trust rather than any others. Also under FEMA (Foreign Exchange Management Act), a foreigner can form the Trust in India. The Trust Registration can be done with a minimum of 3 members. Also, the blood relations can also form the Trust. If the beneficiaries are among the family then it comes under the Private Trust.
Types of Trust Registration and its detailed view
The Trust registration is of two types. They are 12A and 80G.
12 A Registration
This is a one-time registration. After incorporation 12A registration is done. When the Trust has 12A registration it can enjoy tax exemption. It is granted by the Income Tax department to all non-government organizations.
The income received by the Trust is free from taxes. When obtained 12A registrations the Trust can get donations from domestic and foreign countries. If the charitable trust offers help for the poor, then meets the requirement for getting 12 A in the Income-tax.
No commercial aspects should be present. It needs self-certified copies of trust registration documents. Annual financial statements should be provided. The rejection may happen and it must be attached. When all such documents are produced, and if the commissioner is satisfied then the registration is possible.
80G registration
The 80G registration grants tax exemptions for the people who grant donations. So this is to encourage more donors and has some Importance .
It requires no religious activities which encourage a particular caste or religion. If you are carrying out both business and the Trust, you should keep it separate.
The business need not have an 80G certificate. The donations which you get from the public should not be misused. The funds or donations should not be used for political or violent activities.
The documents include NOC, Trust deed, copy of PAN, balance sheet, income tax details, and 12A registration copy which is issued under section 10 (23) or section (10) (23 C). Address proofs are also important in registering the 80G.
Trust is always run to help the needy people at any time and for any cause. And also the Trust must be protected under the Government laws.
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