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Charitable-trust-and-their-registration

 

Charitable trust and their registration

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See the related post : Tax Exemption of Charitable Trust

Introduction-

A charitable trust is set up to hold and protect some or all of your assets specifically for charitable purposes and allows you to support causes and charities on an ongoing basis. They are non-profit based and their main purpose is toward activities which are for the benefit for the Society at large.
 
Trust as an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner.
  • The person who reposes or declares the confidence is called the “Author of the Trust”.
  • The person who accepts the confidence is called the “Trustee”.
  • The person for whose benefit the confidence is accepted is called the “Beneficiary”.
  • The subject-matter of the trust is called “Trust Property” or “Trust Money”.
  • The instrument if any, by which the Trust is declared, is called the instrument of Trust or Trust Deed.
 
As per Sub-section 15 of Section 2 of the Income Tax Act defined charitable purpose includes:-

(a) Relief of the poor,

(b) Education,

(c) Medical relief, and

(d) Advancement of any other object of general public utility i.e. receipts should not exceed 20% of the total receipt of the trust.

 
See the related post : Deductions under chapter VI-A
 
The following things are required for creation of Charitable Trust-
  • Prepare a Trust Deed on stamp paper of the requisite value
  • The trust deed so formed shall be registered with the locally empowered registrar who will register the trust under Indian Trust act, 1882.
  • The trust deed would have due stamps required to incorporate such institution (ratable as per the norms of registration)
  • The photo identity of the person setting up the trust along with his passport size photograph on the same deed.
  • Passport size photograph of the two trustees who are being handed over this trust.
  • Signature of the person setting up the trust.
  • Signature of two witnesses on the trust deed.
  • After compliance of all the relevant formalities the trust deed is submitted to registrar and after the approval of Registrar the trust comes to existence.
 
Classification of trusts-
  1. Private trust
  2. Public trust
 
Private trust-

Private trusts are the trusts which are formulated to benefit or to contribute towards any specific class or category of people and keeps their prospective interests on the key for such formations.  So a private trust could be recognized as a trust which has a specific cause of formulation and it has certain class which is made as the beneficiary.

 

The salient features are as under-

  • Any person can form a private trust
  • A private trust should have a legal purpose which is not forbidden by law and procedure to be adopted shall also be legal.
  • The person so forming the trust should have attained majority, should be of sound mind must not suffer from any mental disability which renders him not suitable for holding any place or position.
  • The person setting up any private trust should not be declared to be bankrupt or disqualifies by any other law or legal means.
  • The person who is minor can also establish or create a trust but this condition would require prior approval from civil court of competent jurisdiction.
 
Public trust-

Private trusts are formulated without any specific intention and the beneficiary class of society is also not clear. Such trusts are not very effective in administration and they have no such big participation into the development of the status of society neither they have any such mandatory obligation for such community service. The major purposes of incorporation of such public trusts are to manage religious affairs and such institution manages their personal dominations and other financial gifts as for religious donations.

 
For registration of Charitable Trust the following information must be required in the application form-
  • Name of the trust.
  • Address of the trust
  • Objects of the trust(charitable or Religious)
  • One settler of the trust
  • Two trustees of the trust
  • Property of the trust-movable or immovable property
 
See the related post : How to E file Income Tax Return
 
Steps to be taken for registration of Charitable or religious Trusts-
  • A trust should make application in form 10A in triplicate to the income tax authority that has jurisdiction on the trust. In the case of a charitable trust, if they wish to apply for80G, an application in form 10G (in triplicate) is required to file. Along with the application/s, the following documents are to be enclosed.
  • Registration Certificate and Trust Deed
  • No Objection Certificate from Landlord (if the registered office is situated in rented premises);
  • Copy of PAN card of Trust,
  • Copy of Electricity Bill/House tax Receipt/Water Bill for proof of address.
  • Evidence of welfare activities carried out & Progress Report since inception or last 3 years such as photographs, paper cuttings etc.
  • Financials & ITR (if any), since inception or last 3years
  • List of donors along with their address and PAN
  • List of governing body board of trustees members with their contact details
  • Bio data of all the trustees (2 sets)
  • Photos- of all the trustees (2 each)

The applicant should furnish Original Registration Certificate and Trust deed for verification of the income tax department.

 

Section 12AA. The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1) of section 12A, shall—

(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b) After satisfying himself about the objects of the trust or institution and the genuineness of its activities, he—

(i) Shall pass an order in writing registering the trust or institution;

(ii) Shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,

and a copy of such order shall be sent to the applicant :

 

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.




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