A trust can be created by the execution of a trust deed. The trust is divided into two categories one is a public category (charitable trust) which is created for the benefit of the general public and on other hands, second is a private trust which is created for the benefit of a particular group of individuals which is also known as the beneficiary.
Useful Resources for Trust Registration
Trust Registration under Indian Trust Act, 1882
Before registering your trust you will need to decide the following things:
- Trust Name
- Trust Address
- 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.
Prepare a Trust Deed on stamp paper of the mandatory value (The value of stamp varies from state to state depending upon the amount of Fund)
Process for registration of Trust with the Local Registrar under the Indian Trusts Act, 1882:
- Trust Deed on stamp paper of mandatory value
- One passport size photograph and copy of ID proof of the settler
- One passport size photograph and copy of ID proof of each of the two trustees.
- One passport size photograph and copy of ID proof of each of the two witnesses.
- Signature of settler is a must on all the pages of the Trust Deed
The Registrar holds the photocopy and returns the original registered Trust Deed copy along with Registration Certificate of Trust.
Apply PAN to the Income Tax Department and opening of the bank account of trust after passing of proper resolutions.
Applicability of 80G Registration and 12AA Registration
The 80G Registration and 12AA Registration is applicable only to NGO’s and charitable organizations that: –
- No income is generated from the business
- Is either a registered society or a charitable trust
- Should not be using their assets or income for any other purpose than charity
- Maintains a regular book of accounts of their receipts and expenses.
- The trustees or the governing body of the organization are not deriving any undue benefit from these funds
- They should not be working to benefit any particular religion or caste
- If there is business related income, there should be maintained separate accounts for it. The donations which are received by the NGO should not be used for such businesses.
12AA and 80G Registration procedure typically need to be done by an NGO immediately after its incorporation.
What is 80G Certificate?
80G Certificate is issued to non-governmental organizations (NGO) or a non-profit organization, a charitable trust or a Section 8 Company by the Income Tax Department. The purpose behind the 80G certificate is to encourage more and more donors to donate funds to such organizations. The advantage that the donor avails by donating to such an NGO is that he gets tax exemption on 50% of his donation as the donor is allowed to deduct their donations from their Gross Total Income. To avail the tax exemption, the donor needs to attach the stamped receipt against the donation that is issued by the NGO – the receipt needs to include the name, date, and PAN of the organization.
80G Registration Process
The 80G Registration procedure consists of the following steps:
- The application for 80G certificate needs to be submitted to the Commissioner of Income Tax (Exemption) in the jurisdictional area of the institution.
- Once the form and the required documents for 80G registration are submitted, an on-the-premise inspection is done by the Income Tax department.
- The officials might ask for additional documents and evidence that are required to be made available by the institution.
- On satisfactory verification and scrutinizing of documents and the office of the NGO, the 80G certificate is awarded to the institution by the Commissioner.
Validity: 80G Certificate valid for a lifetime.
Documents Required for 80G Registration
The following documents are required for 80G registration:
- Form 10G.
- List of welfare activities being carried out and the progress report for last the three years.
- Donor list along with their PAN and complete address.
- PAN card copies of the NGO.
- Copy of Utility Bills – water bills, electricity bills or House Tax Receipt.
- A detailed list of the board of trustees.
- Book of Accounts and Income Tax Return documents of the last three years.
- No objection certificate from the owner of the property, where the registered office of the Institution is located.
- Deed for Verification – Original RC, Trust Deed or MoA
- Registration certificate and MoA in case of Section 8 companies & Societies; Trust Deed in case of a Trust.
What is 12AA Registration?
By virtue of 12AA registration, Trusts and NGOs and other Section 8 companies enjoy exemption from paying income tax. NGOs are basically organizations that are meant for non-profit activities and charity. However, they do have income and also would be required to pay tax as per normal rates if not registered under section 12A of the Income Tax Act. Section 12AA of the IT Act, 1962 does not differentiate between charitable and religious Trusts. Hence 12AA registration is applicable to both the kinds of organizations.
12AA Registration Process
- The application needs to be done using Form 10A, as per Rule 17A of the Income Tax Act, 1962. The application needs to be filed with the Jurisdictional Commissioner of Income Tax (Exemptions).
- Once the Form and the documents have been received, the Commissioner verifies the authenticity of the activities of the organization. He can also call for additional documents and information as considered fit.
- On the satisfactory report, he will pass an order in writing for grant of 12AA Registration. In case the Commissioner is not satisfied he will reject the application after which the applicant is given a fair chance to be heard.
12AA Registration can be canceled at any point in time subject to proof that the activities of the organization being carried out is against the object of the institution or are not genuine or is benefitting a particular religion or caste or the funds are being invested in prohibited modes or income of the institution is being used for the benefit of specific persons.
Validity: 12AA Registration valid for a lifetime.
The following documents required for 12A registration
- Form 10A.
- Documental evidence of the creation of the Trust or NGO – Trust Deed of a Trust; Registration Certificate and Memorandum of Association of a society; section 8 companies to submit a certificate of incorporation and copies of MoA & AoA of the company.
- Three-year bank account statement of the Trust.
- PAN card of the organization.
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