Meaning

The non profit organizations in India can register either as:

• Trusts or
• Societies or
• Private Limited Company under section 8 of the Companies Act.

These organizations work for companies at large and undertake public welfare activities with a charitable purpose. Such purposes may include social contribution in the form of education, medical help or undertaking activities of public utility that promote public welfare.

Thus, the most preferred way to run an NGO or a non – profit organization is to form a Public Charitable Trust.

A Trust can be a private or public Trust depending upon the class of people that receive benefits. Furthermore, the main intent of running a Trust is to transfer the property to the beneficiary.

What is a Trust?

As per the Indian Trust Act 1882, a Trust is an arrangement where the owner (trustor) transfers the property to someone else (trustee) for the benefit of a third person (beneficiary). Such a property is transferred by the trustor to the trustee along with a proclamation that the trustee should hold the property for the beneficiaries of the Trust.

Thus, Trusts can be classified into two categories:

Public Trust

It is a trust whose beneficiaries include the public at large. Further, a Public Trust can be further subdivided into Public Charitable Trust and Public Religious Trust.

Private Trust

A private Trust is the one whose beneficiaries include families or individuals. Further, a Private Trust can be subdivided into:

• Private Trusts whose beneficiaries and their requisite shares both can be determined
• The Private Trusts whose both or either the beneficiaries and their requisite shares cannot be determined

Features

12A and 80G Certificates:

A Trust or an NGO can acquire 12A certificate from the Income Tax Department. Thus, a Trust acquiring such a certificate is exempted to pay income tax for the entire lifetime on its surplus income.

Also, an NGO must obtain 80G certificate. This certificate allows donors, that is persons or organizations making donations to an 80G certified NGO, to avail deduction. Thus, such a deduction is given to the donors under section 80G of the Income Tax Act.

Procedure

Registration Process for Public Charitable Trust

• Choose an Appropriate Name for the Trust
  This is the first step in registering the Trust. Additionally, the name so suggested should not come under the restricted list of names as per the provisions of the Emblems and Names Act, 1950.
• Decide the Settlers or Authors and Trustees of the Trust
  There is no defined provision with regards to the number of settlers/authors. However, in most of the cases there is typically one author.
  Further, there is no limit on the maximum number of trustees. But a minimum of two trustees are necessary to form a Trust. Also, the author generally cannot be the trustee. And he needs to be a resident of India.
• Formulate Memorandum of Association (MOA) and Trust Deed of your Trust
  A Trust Deed is legal evidence of your Trust’s existence and it contains the rules and regulations of your Trust. This document also contains the bylaws regarding the changes, removal or addition of the Trustees.
  Memorandum Of Association (MOA)on the other hand represents the charter of the Trust. It defines the relationship of the Trustor with the Trustees and specifies the objectives for which such a Trust is formed. Such a document should contain the names, addresses and occupations of all the members along with their signatures.
• Documents Required to be Submitted at the Time of Registration
• Trust Deed
• Self attested copy of the proof of identity of the settler (Aadhaar card, passport, voter ID, driving license or any such photo ID)
• Self attested copy of the proof of identity of each trustee (Aadhaar card, passport, voter ID, driving license or any such photo ID)
• PAN card
• Proof of the registered office address of the Trust (electricity/water bill or registration certificate)
• Non Objection letter signed by the landowner
• Prepare Trust Deed on a Stamp Paper
• Submit the Trust Deed with The Registrar
• Obtain the Registration Certificate

For any kind of assistance, contact Mr.Manohar B V, FCA, MCom @ manohar@mbvca.in / 9916870055