Procedure to form trust

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 February 2013 Dear All,
I want to form a Trust with its basic objective to help old age people and children education and others.
I want to know the procedure of its formation.
Whether I have to apply for the name first and so then how?
Please guide me.

Hemant Kumar

Hemant Kumar (Expert)
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05 February 2013 Please go through following link...it have whole details of formation.

https://www.caclubindia.com/share_files/formation-of-charitable-trust-51653.asp#.URCgoB04tZ0

Querist : Anonymous

Querist : Anonymous (Querist)

09 February 2013 Sir,
How would we start a trust? Is it necessary to donate firstly?
What are books or cetificate or other documents etc has to be maintained?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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10 August 2024 Forming a trust involves several steps and legal requirements. Here’s a detailed procedure for forming a trust, especially if your objective is to help old-age people and children with education and other causes:

### **1. Determine the Type of Trust**

- **Public Trust:** For charitable or public purposes like helping old-age people and education.
- **Private Trust:** For private purposes or family-related issues (not applicable in this case but good to know).

### **2. Drafting the Trust Deed**

The **Trust Deed** is the foundational document of the trust. It includes the following details:

1. **Name of the Trust:** The trust needs a unique name. It’s advisable to check the availability of the name to avoid conflicts.
2. **Trustees:** Names and details of the individuals who will manage the trust.
3. **Beneficiaries:** Details of the individuals or groups who will benefit from the trust.
4. **Objectives:** Clear statement of the objectives and purpose of the trust.
5. **Property/Assets:** Description of the property or assets that will be transferred to the trust.
6. **Powers and Duties:** The powers and responsibilities of the trustees.
7. **Duration:** If applicable, specify whether it’s a perpetual trust or for a defined period.
8. **Governing Law:** The laws under which the trust will operate.

### **3. Registration of the Trust**

- **Draft the Trust Deed:** Prepare a detailed Trust Deed as per the requirements.
- **Stamp Duty:** Pay the applicable stamp duty on the Trust Deed as per state laws.
- **Register the Deed:** Submit the Trust Deed for registration to the local Sub-Registrar or Registrar of Trusts.

### **4. Obtain a PAN Card for the Trust**

- **Application:** Apply for a Permanent Account Number (PAN) for the trust by filing Form 49A with the Income Tax Department.

### **5. Open a Bank Account**

- **Trust Account:** Open a bank account in the name of the trust. You will need to provide a copy of the Trust Deed, PAN, and registration certificate.

### **6. Tax Registration**

- **Income Tax Exemption:** Apply for exemption under Section 12A/12AA of the Income Tax Act for tax exemptions on income received by the trust.
- **GST Registration:** If applicable, register for Goods and Services Tax (GST) if the trust engages in activities that require GST registration.

### **7. Compliance and Maintenance**

- **Books of Accounts:** Maintain proper books of accounts as required by law. This includes records of all transactions, donations, expenses, and income.
- **Annual Return:** File annual returns with the relevant authorities, including income tax returns and any other statutory filings.
- **Audits:** Regular audits may be required based on the size and scope of the trust.

### **8. Donation and Fundraising**

- **Initial Donation:** It’s not mandatory to make an initial donation to start a trust, but having a seed fund or initial corpus helps in operationalizing the trust.
- **Fundraising:** If required, undertake fundraising activities in compliance with regulations.

### **9. Documents and Certificates**

- **Trust Deed:** The primary document.
- **PAN Card:** For tax purposes.
- **Registration Certificate:** Proof of registration with the local authority.
- **Bank Account Statement:** For the trust’s financial transactions.
- **Books of Accounts:** Ledger, journal, and other accounting records.

### **10. Additional Considerations**

- **Legal Compliance:** Ensure compliance with various laws and regulations governing trusts.
- **Legal Advice:** Consider consulting a legal expert specializing in trusts for detailed guidance and to ensure that all legal requirements are met.

### **Checklist for Forming a Trust**

1. **Draft the Trust Deed**
2. **Pay Stamp Duty**
3. **Register the Trust**
4. **Obtain PAN Card**
5. **Open a Bank Account**
6. **Apply for Tax Exemptions**
7. **Maintain Books of Accounts**
8. **File Annual Returns and Comply with Regulations**
9. **Initial Donation (Optional but Recommended)**
10. **Ensure Compliance and Seek Legal Advice**

By following these steps, you can establish a trust effectively and ensure it operates within the legal framework. If you have specific questions or need further assistance, consulting with a legal advisor or trust specialist can provide tailored guidance.

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