Process for Trust Registration in India

In India, charitable entities can be mostly registered under the following legislations:

·         Societies Registration Act, 1860.

·         Public Trust Act of various States in India.

·         Section 8 of the Companies Act, 2013.

First Step : Selection of name

First thing is to select a unique name of your trust, the name should not violate or infringes someone else name or trademark.

Second Step : Drafting of Deed

The trust deed needs to be drafted wherein the parties to the deed shall be settlor (author of the trust deed), the trustee and the beneficiary.

Third Step : Trust Registration

A trust deed is a document which requires mandatory registration before the registrar of the trusts having jurisdiction. To register a charitable trust, an application for Trust registration must be made to the official having jurisdiction in the state for Trust registration. For instance, in the state of Maharashtra, the Charity Commissioner is responsible for Trust Registration and in other cases, to the sub-registrar office having jurisdiction based on the registered office of the trust, and the government registration fee is to be paid after that.

On the appointed date the trust deed is presented before the sub-registrar where all trustees need to be present along with two witnesses. The registration process is then undertaken by the office of the sub-registrar, and the registered deed can be collected after a week time.

Fourth Step : PAN, TAN and Bank Account

After registration of the trust, the next step is to apply for allotment of PAN Number and TAN and thereafter opening of a bank A/c for the trust.

Public Charitable Trust

Under the local laws in India, a trust can be formed either as a private or a public trust. Formation of a private trust is governed by the Indian Trust Act, 1882. However, the Indian Trust Act, 1882 does not govern trusts of public charitable nature. There is no central law governing public charitable trusts, although most states have "Public Trusts Acts." In the absence of a Trusts Act in any particular state or territory, the general principles of the Indian Trust Act, 1882 are applied.

To form a public charitable trust, it is very important that the objects of the trust must be charitable in nature and to engage in activities for general public utility. Public Trusts can submit an application for registration to the deputy/ assistant Charity Commissioner having jurisdiction over the region/sub-region in which the trust is sought to be registered.

Private trusts

The Indian trusts Act, 1882 governs all the private trusts in India. Private trusts are governed by the Indian Trusts Act, 1882 and are used for private purposes, such as running a private estate or institution. Privates trusts are not given any tax benefits by the Government of India.

Societies Registration Act, 1860

The society’s act of 1860 also provides for registration of non-profit organization and charitable trust.

Section 8 of company under companies act 2013

Any person or an association of persons intending to be registered as a limited company for charitable purpose can apply for registration of Section 8 Company to the Registrar of Companies of respective state where the promoters intent to have registered office of the company. 

Comparison among Trust, Society and Non-profit Company

Basis of difference	Trust	Soceity	Section 8 company (non-profit company)
Statute/Legislation	Trust governed by the Indian Trust Act, 1882	Societies are governed by the Societies Registration Act, 1860, which is an all India Act. Many States, however, have variants on the Act.	Section 8 companies are governed by the Companies Act, 2013
Activities allowed	Any kinds of charitable & public utility activities can be undertaken	Same	Same
Jurisdiction	The trusts are under the jurisdiction of Charity Commissioner/ Deputy Registrar of the relevant area.	The power to register a society lies in the hand of Registrar of Societies (Charity Commissioner in Maharashtra)	The power to register a section 8 company lies in the hand of Regional Director and Registrar of Companies of the concerned State.
Area of operation	Can operate throughout India	Can operate  throughout India even if  registered in one particular State. No separate registration is required for operating in another State	Can operate throughout India as the registration is granted by the Central Government
Authority with whom to be registered	Sub-Registrar of Registration at District Level	Registrar of the Societies of the concerned State	Registrar of Company of the concerned State
Registration document/Main documents (Instruments)	For Registration of Trust main instrument is Trust Deed	For Registration of Society main instrument is:—(i) Memorandum of Association and Articles (ii) Rules and Regulations (by laws)	For registration of section 8 company main instrument is Memorandum and Articles of Association
Stamp Duty	Trust deed to be executed on non-judicial stamp paper, (vary from State to State) of prescribed value	No stamp paper required for Memorandum of Association & Rules and Regulations.	No stamp paper required for Memorandum and Articles of Association.
Board of Management (Governed BY)	Trusts are governed by their Trustees or by Board of Trustees	Societies are usually managed by a Governing body or council or managing or Executive Committee	It is managed by the Board of Directors
Transfer of membership	Membership is not transferable	Membership is not transferable	Membership can be transferred. Restriction on transfer can also be placed
Legal Title	Legal title of the property of a trust vests in the hands of trustees	All properties are held in the name of the society	All properties are held in the name of company
Legal status	Limited Legal status	Limited Legal status	Full Legal status
Registration with Income-tax Department under section 12AA as NGO	At par with Society & section 8 company	At par with trust & section8 company	At par with trust & society
Geographical area of Activities	All over India (no need to mention this in the Trust Deed	A separate registration for All India level is required as Indian Societies have different legal and institutional frameworks from State to State. (8 members from different States required)	All over India as Indian Companies have one uniform law across the country.
Number of persons required to register	Minimum – two trustees. No upper limit.	Minimum – seven members are required for formation of State level society. Eight members required from separate States for formation of national level society. No upper limit.	Minimum two for a private company and seven for a public Ltd. company. No upper limit
Cost factor	Low (3,000 to7,000)	Medium (5,000 to 20,000)	High (50,000 or more depending upon prescribed capital structure)
Transparency in working	Low	Low	High as everything is available online

 

Family member	Can become trustee	Registrar’s object on becoming family member part of the Governing Body	Can be Directors
Foreigner as a Member/Trustee	Possible	Same	Same
Removal of members	Not Applicable	Possible without consent	Not possible without consent
Mode of succession on Board of Management	Usually by Appointment or Election	Appointment or usually Election by members of the general body	By Appointment
Nature of Control	One man control, i.e. settlor or Founder Trustee in Private Trust and in Public Trust Board of Trustees (two or more)	Democracy system. Decisions are made by voting power struggle may ensure.	Governed by Directors or a managing committee or a Governing council elected by its members. (Mentioned in Memorandum)
Name Availability	Easily available	A bit difficult to get the desired name (Difficulty in availability)	An application has to be made for availability of name to the Registrar of Companies.
Holding of office (office holder’s tenure)	Trustees generally hold office for whole  life	Members hold office for a period of time and may stand for re-election	All the rights of the shareholders as per the Companies Act
Objectives	Charitable, socially beneficial	Literary, charitable, scientific and resource oriented, have to be specific	Any Non-profit activities mentioned in Memorandum.

 

	Examples		(i) Mother Teresa Charitable Trust (ii) Amar Jyoti Charitable Trust		Trade Association		NTPC Ltd.
	Formation		Complex procedure, 3 to 6 months		Simple and easy		Simple and easy within 30 days from the date of filing of application.
	Annual documents to be filed		No documents are required to be filed		The Act requires a list of managing body to be filed every year. But different States have different requirements for filing additional documents every year		Annual return and audited accounts are required to be filed every year
Annual compliance		There is no requirement of annual return or document filin g.		Societies must file annually, with the Registrar of Societies, a list of the names, addresses and occupations of their managing committee members.		There is requirement of annual compliance by filing of annual accounts and return of company with the Registrar of Companies (ROC).
Meetings		No provisions laid down		Annual meetings as per law. Governing Body meeting as per the rules of society		To be held as per provisions of company law which are quite extensive.
Audit required		Audit is compulsory only under the Income Tax Act		Audit is compulsory under Societies Act & also the Income Tax Act		Audit is compulsory under the Companies Act and also Income Tax Act

 

Borrowings	Only from the Author	Only from its members	From members and also from banks and institutions
Voting Rights	All trustees have equal rights	All members have equal voting Rights	Voting rights are proportionate to the share capital (i.e. on the basis of shareholding)
From the point of view of Grant of subsidy by the government	Less preferred	Less preferred	Most preferred
FCRA registration or prior permission	Compulsory for receiving foreign funds.	Same	Same
From the point of view of Foreign Contribution Regulation Act (FCRA) Registration	Less preferred	Less preferred	Most preferred
Bank a/c operation	Controlled by one person, Settlor	Two persons, either President or Secretary and Treasurer	As authorized by Board of Directors
Possibility of amendments	Can easily be done supplementary Trust Deed	Relatively more difficult. Both memorandum of Association & Rules and Regulations need to be changed	Shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.
Penalties	Various offences and lapses attract severe penalties	Few offences and penalties have been prescribed	Vary negligible
Winding-up	Trust is generally irrevocable, cannot be woundup. However, according to trust deed can be wound up. Surplus assets must be distributed to other charitable organizations	Societies can be wound up or dissolved if 3/5th of the members, so desire. Surplus assets can be distributed among st members.	Like a society (but unlike a trust) a section 8 company may be dissolved voluntarily if majority of the members so desire (in AGM)
Revocable/Irrevocable	Indian public charitable trusts are generally irrevocable	Societies may be dissolved. Dissolution must be approved by at least three-fifths of the society’s members	A section 8 company may be dissolved