Objectives & Agenda : One of the charitable forms of organisation is Trust. It is generally formed for the benefit of public at large (public charitable trusts) or for a specified group of persons (private trusts). Formation of trusts is governed by different legislations and involves various registrations under several Acts. The webinar dwells upon the aspects of formation of trust under relevant legislations, various types of trusts, registration of trusts, taxation of trusts and other relevant aspects of management of trust.

1. Formation of Trusts and its taxation
CS Meenakshi Jayaraman
DVS Advisors LLP
India-Singapore-London-Dubai-Malaysia-Africa
www.dvsca.com

2. Credits and Acknowledgments
Sundar Rajan S

3. Presentation Schema
Meaning of Trust Parties to a Trust
Essential elements
of a Trust
Types of Trust Trust deed
Contents of a Trust
deed
Registration of
Trust
Procedure for
registration
Documents
required for
registration
Caveats
Types of
registration
Taxation of Trusts
Procedure for
registration under
Income Tax Act
Caveats Judicial precedents

4. Meaning of Trusts
A Trust is a transfer of property
from one person (owner) to another with the intention that
it is administered for the benefit of the third person or the owner

5. Parties to a Trust
• Author or settlor is the person who transfers the property to the
TrustAuthor / Settlor
• The person to whom the property is transferred is called the trustee
Trustee
• The person for whose benefit the trust is created is called the
beneficiaryBeneficiary

6. Essential elements of a Trust
The property held by the Trust i.e. the Trust property
Objects for which the Trust is being formed should be lawful
The instrument for formation of a Trust i.e. the Trust deed
Parties to the Trust and transfer of property to the trustee

7. Types of Trust
Trusts
Private Trusts
Discretionary Trusts
(shares of
beneficiaries are
not determinate)
Specific Trusts
(shares of
beneficiaries are
determinate)
Public Trusts
Charitable Trusts Religious Trusts

8. Trust Deed
Trust deed is the legal document in writing which contains the terms and conditions on which the Trust is formed
It binds all the parties to the Trust and acts as a conclusive evidence for formation of Trust
Creating a Trust deed is not mandatory except for private Trust having immovable property but it is preferable to have it since
it is in writing
It is mandatory to have a Trust deed executed in place in order to get registered under Income Tax Act and avail exemption of
income from tax

9. Contents of a Trust Deed
Names of the author, trustee and beneficiary of the Trust
Name of the Trust to be formed
Address of its principal place of business
The property held under the Trust for the benefit of beneficiary
Objects for which the Trust is created
Rights, duties and liabilities of the settlor, trustee and beneficiary
Matters pertaining to the management of the Trust like appointment and removal of trustee,
meetings of the trustees, accounts and audit, etc.

10. Registration of Trust
It is optional to register a Trust except in case of private Trusts having immovable property transferred to the Trust
Registration of the Trust deed provides right to the Trust to enforce any legal proceedings in the court of law
It is mandatory for a Trust to get registered under Income Tax Act to avail tax exemptions
There are various kinds of registration that can be done by a Trust

11. Procedure for registration
Selection of unique name for the Trust which should not resemble any existing name or trademark
Determine the number of each parties to the Trust. There should be atleast 2 trustees for registration of a Trust
Execution of Trust deed on a stamp paper of requisite value (as per relevant State Stamp Act)
Collate the required documents for submission to the Registrar of Trusts
Submission of Trust deed along with the required documents to the local Registrar (Registrar falling under the jurisdiction of
the address of the Trust)

12. Documents required for registration
Trust deed executed on a stamp paper of requisite value
2 passport size photographs each of the settlor and the trustees
Self attested copies of proof of identity of the settlor and the trustees
Proof of registered office address of the Trust, latest utility bills and No objection Certificate from the owner
Self attested copies of proof of identity of two witnesses

13. Caveats
Signature of the settlor should be placed in all the pages of the Trust deed
Atleast 2 witnesses should sign the Trust deed
At the time of registration, the settler & two witnesses are required to be personally present, along with their
identity proof in the original. Physical presence of trustees are different for different states.

14. Types of registration for a Trust
• Registration of trust deed under this Act is mandatory for
private Trusts holding immovable property
• It is optional for other types of Trusts
• However, it is preferable to get the Trust deed registered
• Registration is to be done with the sub-registrar of the
Registration Department of the respective State Government
Indian Registration Act
• Public Trusts are governed by the legislations of respective State
Governments
• Such legislations may or may not mandate public Trusts to get
registered under the Act
Public Trusts Act

15. Contd.
• To get income tax exemption for carrying out charitable
activities, it is mandatory for the charitable institution to get
registered u/s 12AA of the Income Tax Act, 1961
• Only Trusts engaged in the services of charitable or religious
activities shall be registered under this Act
Income Tax Act
• In order to obtain foreign donations, it is essential for a Trust to
get registered under this Act
• The Trust should obtain a registration certificate from the
Central Government
Foreign Contribution Regulation Act

16. Taxation of Trusts
Trusts are taxed under Income Tax Act unless they are specifically excluded u/s 11 and 12 of the Income Tax Act, 1961
Exemption is available to charitable and religious Trusts which are registered u/s 12AA of the Income Tax Act
Also exemption of income from tax is available to specific institutions u/s 10 of the Income Tax Act

17. Procedure for registration
Application in Form 10A should be filed electronically along with relevant attachments like certified copy of the trust deed,
note on activities to be carried on by the Trust, certified copy of registration of Trust, etc.
Application shall be digitally signed in case the return of income has to be filed using digital signature or else it shall be signed
using electronic verification code
Commissioner of Income Tax (CIT) shall verify the application and ask for any relevant documents to satisfy himself/ herself
about the genuineness of the activities of the Trust
CIT shall pass the order granting or refusing registration within 6 months from the end of the month in which application for
registration is received by CIT
In case of failure by the CIT to pass the order within the abovementioned time limit, it is deemed that the registration is
granted to the applicant

18. Deduction available to donors
Deduction shall be claimed by the donor to the extent of 50% of the donations made u/s 80G of the Income tax Act provided the
following conditions are satisfied by the Trust
1. The Trust derives income which is exempt u/s 10 (23AA), 10 (23C), 11 and 12 of the Income Tax Act
2. Trust deed does not contain any provision stating that the income or assets of the Trust shall be
transferred or applied for other than charitable purpose
3. Trust is not formed for the benefit of particular religious community or caste
4. Trust maintains regular books of accounts of its receipts and expenditure
5. The Trust is constituted as public charitable Trust
6. Trust is approved by the Commissioner under Rule 11AA where application for such approval has to be
made by the Trust in Form 10G

19. Caveats
Since, the application in Form 10A for registration under Income Tax Act asks for certified copy of registered
certificate of Trust, it is essential to register the Trust under the respective State legislations to get registered
under the Income Tax Act
Tax audit is mandatory for a Trust whose total income exceeds the basic exemption limit of Rs. 2.5 lakhs and the
tax audit report in Form 10B should be filed along with the return of income

20. Judicial Precedents
Violation of provisions of section 13 empowers an assessing authority to forfeit exemptions permissible under sections 11
and 12 but such a violation cannot form a ground to cancel registration by passing an order under section 12AA(3)
• Lilavati Kirtilal Mehta Medical Trust vs. Commissioner of Income-tax, (Central)-I, Mum. -
[2019] 108 taxmann.com 272 (Mumbai - Trib.)
At stage of registration, question of application of income of trust is premature; where undisputedly 71 percent of receipt of
trust were spent in accordance with its object, merely a partial expenditure, which was for religious purposes was not to
make trust non-genuine
• Commissioner of Income-tax (Exemption) vs. Manekji Mota Charitable Trust -
[2019] 109 taxmann.com 258 (Bombay)

21. Thank You
DVS Advisors LLP
India-Singapore-London-Dubai-Malaysia-Africa
www.dvsca.com
Copyrights © 2019 DVS Advisors LLP