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Registration under 12AA and 80G

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Our expert professionals are providing services for Registration under section 12A and Approval under Section 80-G of Income tax Act, 1961 in the case of NGO.

Registration under 12AA and 80G

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TRUST

The concept of `Trust ‘relates to the ancient times. When the properties were dedicated for charitable, pious, religious, social welfare, educational, medical purposes.Now a days, it has gained a greater significance for various tax exemptions made available to a trust which is treated as a separate legal entity.Trusts have their own policies since they can be public or private trusts. It does not need any aid from the government or any organization.

Trust, Society and Section 8 Company can seek registration u/s 12A to claim exemption under provisions of Income Tax Act’1961, if certain conditions are satisfied. Section 12A deals with registration of trust and section 12AA deals with procedure for registration of trust.

“It is important to note here that notwithstanding the fact that trust, society and section 8 companies are registered as per their respective acts, the registration under section 12A is necessary to claim exemption under Income Tax Act.”

 

Meaning of Trust
  1. An obligation annexed to the ownership of property and
  2. Arising out of confidence reposed in and
  3. Accepted by the owner or declared and accepted by him
  4. For the benefit of another or of another and the owner.

Author of the Trusts – The person who responses or declares the confidence

Trustee -   Person who accepts the confidence

Beneficiary - The person for whose benefit the confidence is Accepted.

Trust Property -The subject matter of the trust.

Instrument of trust - Trust of immovable property can be created by an Instrument in writing and registered, signed by the Author of the trust or by will.

 

Trust of movable property requires no writing or registration.

CLASSIFICATION OF TRUST
  1. Simple and Special Trusts
  2. Oral and Written Trusts
  3. Charitable / Religious Trusts
  4. Constructive Trust
  5. Public and Private Trusts
  6. Express and Implied Trust

 

WHO CAN CREATE OF A TRUST

  • By every person competent to contract ,and
  • With the permission of a principal Civil Court of original jurisdiction by or on behalf of a minor.

Thus, generally any person competent to contract and competent to deal with the property can create a trust.

 

WHO MAY BE A TRUSTEE

  • Every person capable of holding property may be a trustee
  • But if the trust involves the exercise of discretion, he cannot execute it unless he is competent to contract.
  • Acceptance of the trust by a trustee may be express or implied.

 

TRUST REGISTRATION

Trust registration requires legal formalities that are needed to follow. A trust can have its perpetual existence after the registration has been done. It could never be revoked once it is created legitimately. There are acts under which a trust of India can have their activities outside India.

A trust is not regulated by an authority and so there is no requirement of filing returns with the registering authority. However, the trust has to file their annual returns as required under the FCR Act, 1976 and Income Tax Act, 1961. A trust can be created by any person who is hard working and competent enough to make a contract. A body, group, institution, limited company can form a trust. A minimum of two members are required to form a trust. There could be a charitable trust that could be created targeting the objectives that have been assigned.

 

Registration of Charitable Trust under the Indian trusts Act, 1882

1. Before you register your trust you will need to decide the following:

a) Name of the trust

b) Address of the trust

c) Objects of the trust(charitable or Religious)

d) One settler of the trust

e) Two trustees of the trust

f) Property of the trust-movable or immovable property (normally a small amount of cash/cheque is given to be the initial property of the trust, in order to save on the stamp duty).

 

2. Prepare a Trust Deed on stamp paper of the requisite value (8% of the value of property of the trust in Delhi. The rate varies from state to state)

 

3. Requirement for registration of Trust Deed with the Local Registrar under the Indian Trusts Act, 1882:

a) Trust Deed on stamp paper of requisite value (as stated on point no.2 above)

b) One passport size photograph & copy of the proof of identity of the settler

c) One passport size photograph & copy of the proof of identity of each of the two trustees.

d) One passport size photograph & copy of the proof of identity of each of the two witnesses.

e) Signature of settler on all the pages of the Trust Deed

f) Witness by two persons on the Trust Deed.

 

Eligibility for 80G

Only donations made to charities prescribed under category 80G are eligible for an 80G deduction. Charities with a religious or business angle are not typically granted 80G certification. Also, gifts made to trusts operating outside India (a foreign trust) are not eligible for tax deduction.

Similarly, if you are donating for a private trust, which is not registered under 80G certification or have given any funding for a political party, you cannot avail of tax exemption for the amount donated. It will be computed as your taxable income.

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Registration under 12AA and 80G
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