Overview: Trust and NGO Registration

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 ‘trusts money’; the ‘beneficial interest’ is beneficiary’s right against the trustee as owner of the trust property; and the instrument declaring the trust is called the ‘instrument of trust.

--------------Blog Contact Form-------------

Section 3 of the Indian Trust Act, 1882 defines the term ‘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 word ‘trust’ in its legal sense has a technical and definite meaning which is very much different from the sense in which this word is used in daily parlance. Trust connotes a legal concept or relationship similarly as other relationships created by law, e.g., Contract, Agency.

Classification of Trust:

Trusts are divisible into several classes according to the mode of their creation. Some of the important classes are as follows:

• Simple and Special Trusts 

Where the trustee is merely to hold the estate without having any active duties to perform, it is called a simple trust. Where, however, the trust has been created for a particular object or purpose, there is a special trust. Thus, in simple trust, the trustee is merely to hold the property for the benefit of the beneficiary and in a special trust; the trustee has duties to perform.

• Oral and Written Trusts 

A trust may be declared either orally or through an instrument in writing. However, trust in relation to movable property can be declared orally by transferring the possession of the property with a direction that the property be held in trust. In regard to a private trust for immovable properties, a written trust deed is a pre-requisite.

• Charitable or Religious Trust 

In order to determine whether a deed of trust is a valid public or charitable trust, it is necessary to see what the dominant intention of the testator is, namely, who are the real objects of his bequest and secondly whether the class indicated as the object of charity forms at least a section of the public. Where the main and paramount intention of the settler was to benefit the members of his family and thereafter the members of his caste who might need assistance from such funds, there could be no public or charitable trust created. It is one of the cardinal rules governing the execution of charitable trusts that the intention of the donor must be observed. This principle has evolved as an auxiliary to this rule and is never allowed to defeat it. If the charity can be administered according to the directions of the founder, the law requires that it should be so administered. The Courts will not allow any departure from them on the grounds of expediency.

• Express and Implied Trusts 

Express trusts are created by the act of parties either in words or in writing, while an implied trust is one that is deduced from the conduct of the parties and the circumstances of the transactions.

• Public and Private Trusts 

The criterion for deciding whether a particular trust is or is not of a private nature is whether the said trust is or is not for the benefit of individuals. Where the intention of the founder, as shown by the recitals in his Will, was that the property was to be dedicated for the benefit of idols, the trust is undoubted of a public nature and not for the benefit of the individual members of his family. The essential difference between a private and public trust is that in the former, the beneficiaries are definite and ascertained individuals or individuals who within a definite time can be definitely ascertained, but in the latter, the beneficial interest must be vested in an uncertain and fluctuating body of persons either the public at large or some considerable portion of it answering a particular description.

• Revocable and Irrevocable Trusts 

A revocable trust is one that is revocable when it is created by a non-testamentary instrument or orally and a power of revocation has been expressly reserved by the settler. A trust may be revoked by the consent of all the beneficiaries who are competent to contract. All other trusts are irrevocable. Besides if a trust is created for charitable or religious purposes, such a trust cannot be revoked

• Constructive Trust 

A constructive trust is one which is not created by the express or implied act of the settler, but which is deemed by operation of law or arises by construction of law. A constructive trust is a relationship with respect to a property subjecting the person by whom the title to the property is held by an equitable duty to convey it to another on the ground that his acquisition or retention of the property would be wrongful and that he would be unjustly enriched if he were permitted to retain the property.

The procedure of Registration of a Trust

The application for registration of a trust shall contain the following particulars: –

• Particular of documents creating the trust
• Particulars other than documents about the creation
• Objects of the trust
• Sources of income of the trust
• Particulars of encumbrances, if any, on trust property
• Particulars of the scheme, if any, relating to the trust
• Particular of title deeds pertaining to the trust’s property 
• The name and addresses of the Trustees and managers

Preparation of Trust Deed:

It is not compulsory but is desirable as it is enforceable by law. Following details must be mentioned in the deed:

1. Name and address of trustor (the one who setting up the trust)
2. Name and address of other trustees
3. Name of trust
4. Minimum and maximum number of trustee
5. Registered office address of the trust
6. Objective of trust
7. Rule and regulation of trust

• Parties to the trust, at least three parties are required to form a trust.
• Author of the trust: The person who reposes or declares the confidence is called the ‘author of the trust’. The name and address should be mentioned in the deed.
• Details of trustees/members: The address and details of trustees shall be mentioned indeed. A minor cannot be a member/trustee.
• Details of beneficiaries shall also be included indeed. (The person for whose benefit the confidence is accepted is called the ‘beneficiary’) 

Objects of the Trust

The Objective must be incorporated indeed.

• Registration of trust by trust deed:

After the preparation of Trust now another step is to register the Trust deed. Registration is not compulsory but is needed to get the trust registered under the Income Tax Act for availing the exemptions and more over a deed is a prima facie evidence of the existence of a trust. The trust deed shall be submitted to local registrar along with the one photocopy and the settler shall sign all the pages.

• Address for correspondence & Evidence:

Recent electricity Bill / Telephone Bill / Property Card of the Trust location.

Tenure of Trustees:

Tenure shall fix a minimum of 1 year to a maximum of 5 years.

• Application for 80G and 12A certificate for tax benefits:
• After valid trust registration, one shall go for 12A and 80G registration to get the Tax advantage.

Documents required for registration:

• Trust Deed on stamp paper with requisite stamp duty
• Passport size photograph & Identity Proof of trustor (one who set up the trust)
• Passport size photograph & Identity Proof of two trustees
• Passport size photograph & Identity Proof of two witnesses
• On each page of the trust deed, the signature of the trustor
• Two witnesses on the trust deed

The following documents are required to be submitted for 80G certificates:

• Form 10G
• Registration Certificate
• Copy of PAN Card
• Copy of Utility Bill
• NOC from landlord
• Copy of Trust Deed
• Books of accounts for the past three years
• Copy of Trust Deed
• Evidence of welfare activities