Setting up a trust for school

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 July 2015 Hi, I am setting up a school in MP and would like to set up a trust for that. Can someone please tell me the following:
a. Share a draft copy of the Trust deed?
b. Where does the deed get registered? In Bhopal or from the District Collector?
c. What value of stamp paper does one get it made on?
d. The Trust does not own any land or property and the school will function from rented premises. I had read somewhere that there needs to be property to form a Trust. Can someone please confirm?
e. Does it need to be a public charitable trust or a private trust will do?
f.If I wish to raise grant money, what is a better form of the above two?
g. Would I need to separately apply for IT exemption once the Trust is formed?
h. Can Trustees be paid a salary? What is the tax rate on this?

Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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16 July 2015 a See the link for deed.
www.caclubindia.com/experts/trust-deed-to-form-a-school-331005.asp
b Form it as a society and register it with registrar of societies.
c Registrar office will tell you the requirement of stamp value.
d No ownership of land is required.
e It should be public charitable trust.
f Public trust is the best option.
g Yes separate application is required for IT.
h Trustees can't be paid any salary.

Querist : Anonymous

Querist : Anonymous (Querist)

17 July 2015 Thank you.

Is there a reason why I can't form a Trust?
If I do form a society, I would need 7 members right? Also, can salary/honorarium be paid to members of a society? What are the advantages of Society over trust with regard to setting up a school?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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25 July 2025 Great questions about setting up a trust (or society) for your school in Madhya Pradesh! Let me break down your points and also address your follow-up on trust vs society:

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### Your Questions and Answers:

**a. Draft Trust Deed**

* A sample trust deed for a school is available here:
[CAClubIndia Trust Deed for School](https://www.caclubindia.com/experts/trust-deed-to-form-a-school-331005.asp)
* It includes objects, trustees’ details, powers, and management rules.

**b. Registration of Trust Deed**

* Trust deed registration happens at the **Sub-Registrar’s office** where the trust’s registered office is located (e.g., Bhopal or your district HQ).
* You do **not** register it with the District Collector.
* Alternatively, you can form a **Society** registered with the Registrar of Societies (typically under the Societies Registration Act, applicable at state level).

**c. Stamp Paper Value**

* The stamp duty varies by state; consult the Sub-Registrar’s office or local stamp act.
* Typically, Rs. 100 to Rs. 500 stamp paper is used for trust deeds in MP, but confirm locally.

**d. Requirement of Property Ownership**

* **No ownership of property is required to form a trust.**
* The trust can operate from rented premises.
* You only need to mention the trust’s registered office address in the deed.

**e. Public Charitable Trust vs Private Trust**

* For a school meant to serve the public, a **Public Charitable Trust** is advisable.
* Private trusts are usually for family or specific individuals’ benefit, not suitable for schools.

**f. Raising Grant Money**

* A **Public Charitable Trust** or **Society** is better for receiving grants, donations, and tax benefits.
* They are generally more transparent and credible to donors and government.

**g. IT Exemption Application**

* Yes, you must **apply separately for Income Tax exemption under Section 12A/12AA and 80G** to get tax benefits for donations.

**h. Trustee Remuneration**

* **Trustees cannot be paid a salary** from the trust funds as per the Income Tax Act.
* However, they can be reimbursed for actual expenses incurred.
* Payment of salary can jeopardize the charitable status.

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### Your follow-up questions on forming a Society:

* **Do you need 7 members?**

* Yes, minimum 7 members are required to register a society under the Societies Registration Act.

* **Can salary/honorarium be paid to members in a society?**

* Members (office bearers) can be paid **salaries or honorariums** if specified in the society’s by-laws.
* Staff working for the society (e.g., principal, teachers) can also be paid.

* **Advantages of Society over Trust for a School**:

| Aspect | Trust | Society |
| ------------------------ | ------------------------------------ | ------------------------------------------ |
| Members requirement | 2 or more trustees | Minimum 7 members |
| Governance | Trustee-managed | Member-managed (governing body) |
| Flexibility | Less flexible in management | More flexible, democratic |
| Salary to Office Bearers | No salary allowed | Salary/honorarium allowed |
| Compliance | Less compliance | More compliance (annual returns, meetings) |
| Credibility | Good, but sometimes less transparent | Generally more credible for donors & govt |
| Registration | Registrar of Trusts/Sub-Registrar | Registrar of Societies |
| Grant eligibility | Yes, if public charitable trust | Yes, easier due to governance transparency |

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### Summary recommendation for your school:

* **Form a Public Charitable Trust or Society** based on your preferred governance style.
* **Society** is often better for schools as it allows more members, democratic control, and payment to office bearers/staff.
* **Apply for 12A/80G Income Tax exemptions** to attract grants and donations.
* No need to own property upfront; rented premises are fine.

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If you want, I can help draft a sample trust deed or society bye-laws tailored for your school, or guide you through the registration process. Would you like that?

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