Step-by-Step Guide to Registering a Charitable Trust in India

A charitable trust is a legal arrangement where one or more persons (trustees) hold and manage property for public charitable purposes. Under the Indian Trusts Act, 1882, a trust must be created for a lawful purpose and generally requires a written trust deed. In the case of immovable property, Section 5 mandates that the trust deed must be in writing and registered under the Registration Act, 1908. In practice, the registration of the deed (with the sub-registrar) and the trust’s name is carried out under state-specific laws, such as the respective State Charitable and Religious Trusts Acts, rather than through a centralized national system. Registration is essential as it grants the trust legal recognition and is a prerequisite for obtaining tax exemptions under provisions like Section 12A/12AB and Section 80G of the Income Tax Act, 1961.

Establishing a charitable trust requires drafting a proper trust deed and complying with all statutory formalities. The deed must clearly define the charitable objectives—such as education, healthcare, poverty relief, etc.—and must be registered, particularly when immovable property is involved. After the trust is created, it must apply for tax registrations under Sections 12A/12AB and 80G of the Income Tax Act to obtain exemption and deduction benefits.

Key Legal Provisions

1.1 Key Legal Provisions for Public Charitable Trusts in India

• Indian Trusts Act, 1882
  • Section 4: Trusts must be for lawful purposes. “Lawful” means not fraudulent, not injurious to persons or property, and not opposed to public policy.
  • Section 5: Trusts of immovable property must be created by a writing and registered under the Registration Act. Trusts of movable property likewise require writing unless the property is physically transferred.

• State Public/Charitable Trust Acts: Many states (e.g., Maharashtra, Tamil Nadu) have their own acts requiring registration of public trusts. Under these, registration is done with a Local Registrar of Public Trusts.

• Income Tax Act, 1961:
  • Section 12A/12AA/12AB: Governs tax registration of trusts. Registration under Section 12A (provisional) or 12AB (current law) is needed for trust income to be tax-exempt.
  • Section 80G: Allows donors to deduct donations if the trust has 80G approval.

Example –

Registration Requirement: Sita creates a public trust to run free clinics. Because her trust will hold land for a clinic, she drafts a trust deed, executes it on appropriate stamp paper, and registers it at the Sub-Registrar’s office (completing the requirement of Section 5 of the Trusts Act). She then approaches the Regional Assistant Charity Commissioner under the Maharashtra Public Trusts Act for a registration certificate.

1.2 Eligibility and Preparatory Steps

To register a charitable trust, ensure the following:

• Minimum Trustees: Typically at least two to three trustees (often a minimum of three) are required. Trusts Act 1882 does not set a number, but state acts often prescribe a minimum (for example, the Bombay Public Trusts Act requires three).

• Purpose Clause: The trust deed must articulate clearly defined charitable aims (e.g., poverty relief, education, medical relief). Ensure purposes align with Section 2(15) IT Act ("relief of the poor, education, medical relief, preservation of environment, or any other object of general public utility")

• Name Reservation: While not always formal, choosing a unique name avoids confusion. No statutory requirement like companies' DIN, but check state rules (a society/trust name must not be identical to an existing one).

• Registered Office: You need a verifiable address for the trust (proof of ownership or NOC from landlord). This will be its official address for communications.

• Stamp Duty: Pay stamp duty on the trust deed. The duty varies by state (often tied to the value of trust property or a fixed fee). In some states, a nominal registration fee (~₹100) is also payable.

• Digital Signatures/PAN: For tax registration later (Sections 12A/80G), you need a PAN for the trust and digital signatures for trustees. Each trustee should obtain a Director Identification Number (DIN) only if later forming a company, for trusts, PAN and DSC for e-filing Form 10A/10AB are used.

1.3 Drafting the Trust Deed

The trust deed is the founding document. It should include:

• Names, ages, addresses of settlor (author) and trustees.

• Clear statement of charitable objectives (e.g., "The trust is established for the advancement of education among underprivileged children" etc.).

• Details of trust property (description of assets, corpus). If later property is acquired, add by deed or will.

• Powers and duties of trustees (manage funds, invest, grant rules).

• Duration (usually perpetual unless a limited term is intended).

• Cancellation clause: Procedure if trustees retire or die, methods to replace them. Include whether the trust will be transferred as assets to another trust.

• Mode of accounts: Procedure for auditing, banking, resolutions.

Important: The deed must not contravene law. For example, a trust cannot exclusively teach a religion and also get 80G (since pure religious propagation is excluded from “charitable” under IT rules).

1.4 Executing and Registering the Trust Deed

1. Stamp Paper: Purchase state stamp paper as per stamp rules. The value often depends on trust corpus or fixed scale.
2. Signatories: The settlor and all trustees sign the deed in the presence of witnesses. Often, a notary attestation is recommended (some state acts require notary attestation for registration).
3. Registration: Submit the signed deed to the Sub-Registrar of Assurances in the jurisdiction of the trust’s address. Registration involves:

• Paying prescribed registration fee (e.g., ₹1100 in some states).

• Presenting IDs (PAN/Aadhaar) of settlor and trustees.

• Possibly filling a short form with trust name, object, trustees details.

Upon acceptance, the Registrar issues a Certificate of Registration of the trust. This certificate is evidence of the trust’s formation but note that an unregistered trust deed (where registration is mandatory) is void.

1.5 Post-Registration Compliance

Once registered:

• Bank Account and PAN: Open a bank account in the trust’s name using the registration certificate, deed, and PAN (apply for PAN in trust’s name). All receipts and expenses will flow through this account.
• PAN and TAN: Obtain Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) for the trust for tax filings (TRACES portal).
• TIN (if applicable): If the trust engages in business or service, register for GST.
• Section 12A/12AB & 80G Registration: Apply on the Income Tax portal for Section 12A/12AB (tax exemption) and Section 80G (donor deduction) using Forms 10A (for fresh) or 10AB (for renewal/convert provisional).
  • As of 2021, Form 10A is used only once; all subsequent renewals or 80G approvals use Form 10AB.
  • For initial applications, attach trust deed, activities details, accounts of the last 3 years (if existing), and an auditor’s report.
  • After filing, the jurisdictional Commissioner of Income Tax (Exemptions) will verify records and may ask questions before granting registration.
  • Important: submit these at least 6 months before expiry of current certificate.
  • Existing registrations (pre-2020) typically expire 5 years from their date. For example, trusts registered pre-2020 had to get revalidated under new rules up to March 2026.
• Annual Returns and Records: Maintain proper books of accounts. File ITR-7 (income-tax return) annually if income exceeds exemption limits.
• Audit: Statutory audit may be needed if receipts exceed ₹1 crore (or as amended by law).
• Many trusts opt for audit even below this threshold for transparency.
• FCRA (if getting foreign aid): If receiving foreign contributions, register under the FCRA (Foreign Contribution Regulation Act) with the Ministry of Home Affairs.

1.6 Timeline and Practical Steps

Example:

A newly formed trust in Delhi registers its deed on July 10. It obtains PAN by July 20 and opens a bank account by August. In September, it files online Form 10A for 12A and 80G. By November, it receives 12A and 80G certificates, valid for five years from the date of application.

The trust thus can accept tax-exempt donations.

1.7 Benefits and Pitfalls

Benefits of a charitable trust include simplicity of structure, low initial compliance, and direct control by trustees. They can be set up quickly and cheaply (low stamp duty and fees). Trusts can claim broad tax exemptions (if registered) and donors get 80G benefit.

Risks/Pitfalls:

• Legal scrutiny: Courts enforce trust deed strictly. Trustees can be held personally liable for mismanagement or breach of trust duties.

• No profit distribution: Like all NGO forms, surplus cannot go to trustees. However, unlike companies, trusts have fewer formal restrictions but also fewer formal checks (which can lead to governance issues if trustees are not diligent).

• State variation: Different state trust acts have different rules (e.g., Maharashtra vs. Tamil Nadu), so trustees must follow local law for accounts and audits.

• Trustee liability: Under the Trusts Act, trustees must exercise care and are liable for breach (Sec. 15 of Trusts Act). If trust funds are misused, trustees can be sued.

Compliance Tips: Keep detailed meeting minutes and accounts. Obtain a competent auditor’s annual audit even if not mandatory. Update the trust deed periodically to add trustees or amend objectives, but note major changes (like purpose or dissolving) may require court permission or following deed clauses. Ensure renewal filings (Form 10AB) are timely to avoid losing tax status.

“Registering a charitable trust establishes its legal foundation and enhances its operational capabilities through tax benefits and credibility.”