Trust

A Trust is a legal arrangement in which a person or group of people known as settlors (or trustees) transfer assets — like property, money, or investments — to a trust for the benefit of a specific purpose or group of beneficiaries. 

More simply: 

🧑‍⚖️ Settlor → the person who creates the trust
👩‍⚖️ Trustee → the person(s) who manages the trust
💖 Beneficiaries / Purpose → the people or objective the trust serves 

Trusts are widely used for charitable activities, religious goals, family wealth management, education funding, healthcare support, and long-term welfare projects. Once registered, a trust becomes a distinct legal entity (in the case of public charitable trusts) that can hold assets, open bank accounts, receive grants, and operate programs aligned with its mission. 

Trusts play a vital role in Indian society for multiple reasons: 

Social Welfare 

They empower individuals and communities to work toward meaningful objectives like poverty alleviation, rural development, women’s empowerment, and education programs. 

Legacy & Long-Term Impact 

Trusts allow founders to establish institutions that continue beyond their lifetime, ensuring lasting support for a cause or community. 

Asset Protection & Management 

Trusts help manage and protect assets for a defined purpose, preventing misuse or distribution to individual members. 

Philanthropy & Public Good 

They serve as a powerful tool for socially responsible individuals, corporates (CSR), and donors who want their contributions to have a structured and sustained impact. 

Because of their simplicity and flexibility, trusts are among the most common forms of non-profit and charitable organizations in India. They are often easier to form and operate compared to societies or Section 8 companies, especially focused goals.

Legal Framework — Which Laws Govern Trusts in India?

Unlike companies and societies, which are covered by specific national Acts, trusts in India are regulated under state-level Trust Acts because there is no single central law for all trusts. 

The most widely used framework is the Indian Trusts Act, 1882, which specifically deals with private trusts (family or personal trusts). In contrast, public charitable trusts are governed by state Trusts Acts, which vary slightly from state to state. 

Some states also follow their own Trust regulations: 

✔ Maharashtra Public Trusts Act
✔ Gujarat Public Trusts Act
✔ Tamil Nadu Public Trusts Act
✔ Rajasthan Public Trusts Act
✔ Delhi Public Trusts Act (DP Act) 

Understanding the applicable state law is essential because compliance, registration requirements, and oversight can vary. But regardless of the governing law, the core principles of trust registration and operation remain substantively similar. 

Trusts are appealing not just because they serve social goals, but because of several structural advantages:

Trust is a Separate Entity

For public charitable trusts, once registered, they can own and transfer property, open bank accounts, and enter into contracts in the name of the trust.

Trustees Manage Assets

Trustees legally manage and operate trust assets and activities according to the trust deed and applicable law.

Purpose-Driven Assets

Trust property or funds must only be used for the stated objectives of the trust.

Beneficiaries or Public Benefit

Trusts either benefit the public at large (public charitable trusts) or specific persons (private trusts), depending on how they are structured.

Trust Deed as Legal Basis

The trust deed is the foundational document that sets out the objectives, powers, duties of trustees, beneficiaries, and operational rules. 

Why Register a Trust?

While trusts can be created even informally, formal registration brings multiple strategic and legal advantages:

Legal Recognition & Protection

A registered trust is recognized by law as a valid entity with enforceable rights and obligations.

Ability to Hold & Manage Assets

Registered trusts can hold property, bank accounts, investments, and funds in the trust’s name.

Credibility & Donor Trust

Registration increases credibility with donors, funding agencies, government bodies, and partners — which is crucial for fundraising and grants.

Tax Benefits

Registered trusts can apply for income tax exemptions under Section 12A/12AB of the Indian Income Tax Act, allowing them to operate with reduced tax burden.

Donor Incentives

Donors to registered charitable trusts may claim tax deductions under Section 80G of the Income Tax Act — increasing fundraising potential.

Asset Protection

Registration ensures that trust assets are legally protected and used only for their intended purpose.

Easier Compliance for Grants & CSR

For Corporate Social Responsibility (CSR) funding and government grants, registered trusts are often a preferred or required structure. 

The eligibility requirements for forming a trust in India are straightforward: 

✔ Any individual(s) of sound mind (18 years or above) can be a settlor.
✔ At least two trustees are required (the settlor can also be a trustee).
✔ For public charitable trusts, at least two founding members must come together with a shared purpose.
✔ There is no nationality restriction — foreign nationals can be trustees subject to applicable Indian regulations. 

In the case of religious or public charitable trusts, the settlors should be clear about objectives that benefit the general public or a broad category of beneficiaries, not a narrow private group. 

Trust Registration Process – Step by Step

Registering a trust is a legally sanctioned process that provides credibility and enforceability: 

Step 1: Define Trust Purpose 

Start by articulating why the trust is being formed — for education, healthcare, community welfare, etc. This becomes part of the trust deed. 

Step 2: Choose the Trustees

Identify at least two trustees who will manage and oversee trust activities. 

Step 3: Draft the Trust Deed 

The trust deed is the core legal document that contains: 

✔ Name of the trust
✔ Objectives and activities
✔ Details of settlor and trustees
✔ Trustees’ powers and duties
✔ Beneficiaries or public group description
✔ Asset and fund management rules
✔ Terms for succession and operation 

This document must be executed on a non-judicial stamp paper as per state regulations. 

Step 4: Submit to Registrar 

Once the trust deed is finalized and signed, it is submitted to the Registrar of Trusts in the respective state along with: 

✔ Affidavit of settlor
✔ Trustees’ ID proofs & address proofs
✔ Proof of registered trust office
✔ Applicable stamp duty and registration fee 

Step 5: Verification & Registration 

The Registrar reviews the documents. When found compliant, they issue a Certificate of Registration, officially recognizing the trust as a legal entity.

Documents Required for Trust Registration

To complete the registration process, the following documents are typically required: 

•  Trust Deed on non-judicial stamp paper
• Identity proof of settlor and trustees (Aadhaar, PAN, passport)
•  Address proof of trustees and registered office
•  NOC from property owner (if rented office)
• Passport-size photographs of trustees
• Affidavit from settlor and trustees 

Ensuring accuracy and consistency in these documents helps avoid delays or legal challenges. 

Trust Governance – Roles & Responsibilities

1. Settlor

The settlor is the person who creates or establishes the trust by transferring assets and defining its purpose.

     2.Trustee

Trustees are responsible for managing, administering, and executing trust activities in line with the trust deed and applicable law. 

Responsibilities of trustees include: 

✔ Upholding the trust objectives
✔ Managing funds and assets responsibly
✔ Ensuring compliance with laws and regulations
✔ Maintaining clear records and accounts
✔ Reporting to authorities and auditors as needed 

Trustees hold a fiduciary duty, meaning they must act in the best interest of the beneficiaries and the trust’s stated purpose.

Taxation & Benefits for Trusts

Registered trusts in India often enjoy beneficial tax treatment:

Income Tax Exemptions (Section 12A / 12AB)

When registered under Section 12A/12AB with the Income Tax Department, a trust of income used for its objectives can be exempt from income tax.

Tax Deduction for Donors (Section 80G)

Donations made to a registered trust can be eligible for tax deductions under Section 80G, encouraging public contributions and donor support.

Property & Asset Tax Relief

Trust assets may receive beneficial treatment under certain municipal or government regulations when used for charitable purposes. 

To enjoy these benefits, trusts must comply with annual filings and maintain accurate financial records.

Even after registration, trusts must adhere to statutory compliance for transparency and legality: 

 Annual Accounts 

Trusts must maintain clean, audited books of accounts showing income, expenditure, assets, and liabilities. 

Annual Returns 

Depending on the state and trust type, some trusts must file annual returns with the Registrar. 

 Income Tax Filings 

Registered trusts claiming exemptions must file income tax returns and submit relevant forms annually. 

Record Keeping 

Trust deeds, minutes, bank statements, donation receipts, and audit reports must be kept for legal and financial transparency. 

Proper compliance reassures donors, authorities, and stakeholders about the trust’s governance and integrity.

Common Use Cases of Trusts in India

Trusts are flexible enough to serve a wide range of social and welfare goals:

Education Trusts

Managing schools, scholarships, coaching centers, and educational support programs.

Health & Medical Trusts

Operating clinics, health awareness initiatives, free medical camps, and care for underprivileged patients.

Community Welfare Trusts

Supporting rural development, senior citizen care, housing support, food distribution programs, and more.

Religious Trusts

Managing temples, gurudwaras, mosques, or community religious events.

Arts & Culture Trusts

Promoting performing arts, festivals, creative workshops, and cultural heritage preservation.

Environmental Trusts

Conservation projects, sustainability campaigns, tree plantations, waste management initiatives. 

These use cases reflect the diversity of social needs that trusts can address.