How to form a Trust in India?
How to form a Trust in India?
Establishing a trust in India involves a systematic process that requires adherence to legal formalities. Here’s a comprehensive guide on how to form a trust:
1. Understanding Trusts:
Before diving into the formation process, it’s crucial to comprehend what a trust is. In Indian law, a trust is a legal entity created to manage and distribute assets for the benefit of specific individuals or charitable purposes.
2. Identify Purpose and Objectives:
Clearly define the purpose and objectives of the trust. Whether it’s for family welfare, education, or charity, having a well-defined mission is the foundation.
3. Choose Trustees:
Select trustworthy individuals to act as trustees. They will be responsible for managing the trust’s affairs and ensuring its objectives are met.
4. Draft a Trust Deed:
Prepare a comprehensive trust deed that outlines the trust’s objectives, the powers and duties of trustees, and the mode of succession. Ensure it adheres to the Indian Registration Act.
5. Stamp Duty and Registration:
Pay the requisite stamp duty according to the Stamp Act of the respective state. Register the trust deed at the local sub-registrar office. This step imparts legal validity to the trust.
6. Obtain PAN and TAN:
Obtain a Permanent Account Number (PAN) for the trust from the Income Tax Department. Additionally, apply for a Tax Deduction and Collection Account Number (TAN) for tax compliance.
7. Bank Account:
Open a bank account in the name of the trust. The trustees should be authorized signatories. Provide necessary documents, including the registered trust deed and PAN.
8. Compliance with Income Tax Laws:
Ensure compliance with income tax regulations. File for tax exemption under Section 12A of the Income Tax Act by submitting the necessary documents to the Commissioner of Income Tax.
9. Maintain Records:
Keep meticulous records of the trust’s financial transactions, meetings, and activities. Regularly update the trustees and beneficiaries about the trust’s status.
10. Filing Annual Returns:
File annual returns with the Income Tax Department, as failure to do so may lead to a loss of tax-exempt status.
Direct Answer to Your Question:
Forming a trust in India involves several steps, including drafting a comprehensive trust deed, paying stamp duty, registering the trust deed, obtaining PAN and TAN, opening a bank account, ensuring compliance with income tax laws, and filing annual returns. This process establishes a legal framework for the trust to operate effectively.
Disclaimer: This information is intended for general guidance only and does not constitute legal advice. Please consult with a qualified lawyer for personalized advice specific to your situation.
Adcocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)
Contact: 88271 22304
