Registration of Charitable Trust: Benefits, Documents & Procedure

Charitable Trust Registration - Brief Overview

Benefits of Registering a Charitable Trust

• Tax Exemption: Charitable trusts are exempt from paying income tax, allowing all funds received to be utilised entirely for charitable purposes.
• Tax-Deductible Donations: Donors can receive tax deductions for contributions to a registered charitable trust, incentivising more individuals and corporations to donate.
• Access to Government Grants: Charitable trusts can apply for various government grants and funding programs, supporting the organisation’s initiatives and projects.
• Limited Liability: As a legal entity, a charitable trust provides limited liability protection for its trustees, safeguarding personal assets.
• Increased Public Trust: Being a registered entity fosters public trust, making attracting volunteers, donors and collaborators easier.
• Enhanced Fundraising Opportunities: Charitable trust registration opens doors to organised fundraising campaigns and partnerships with other charitable organisations.

Sections under the Income Tax Act related to Registration of Charitable Trust

• Section 12A: This section provides the conditions the trust must meet to avail of tax exemptions.
• Section 12AA: Section 12AA outlines the procedure for applying for registration of a charitable trust, which is essential for availing of tax exemptions under Section 12A.
• Section 12AB: This section requires entities already registered under Sections 12A and 12AA to apply for fresh registration. It is a newly introduced section and became effective on 1st October 2020.
• Section 11: This section provides an exemption for the income derived from the property held for religious or charitable purposes.
• Section 80G: Section 80G allows donors to claim a deduction on donations made to a charitable trust. The trust must be registered under Section 80G to qualify for this benefit. Depending on the type of trust and its activities, the donor can claim a deduction of up to 100%.
• Section 10(23C): This section provides tax exemptions to educational institutions formed based on educational purposes rather than profit.
• Section 35(1)(ii) and (iii): These provisions allow a charitable trust to qualify for tax exemptions on contributions received for scientific research or social welfare, which can be tax-deductible for the donor under specific conditions.
• Section 13: This Section excludes tax exemptions from the trust's income, which is not beneficial to the public.

Eligibility Criteria for Registering a Charitable Trust

• Clearly Defined Purpose: The trust must clearly outline its charitable purposes, such as promoting education, healthcare, poverty relief, or other community welfare initiatives. This purpose must comply with the regulations governing charitable organisations in India.
• Minimum Trustees: The trust must appoint at least three trustees to oversee its activities, manage its operations and ensure its charitable objectives.
• Registered Office Address: The trust must have a valid and verifiable office address. Local authorities must confirm and approve this address.
• Registration with Authorities: The trust must be registered with the appropriate authority, either the Registrar of Societies or the Registrar of Trusts, depending on the chosen legal structure. This step provides the trust with legal recognition and eligibility for benefits like tax exemptions.

Documents required for Registration of Charitable Trust

• Trust Deed: A legally binding document that outlines the trust’s charitable purpose, operational guidelines and governance structure. 
• Identity and Address Proof of Trustees: Copies of valid identification (such as Aadhaar, PAN, or passport) and address proof (such as utility bills or bank statements) for all trustees involved in the specified trust.
• Power of Attorney: If applicable, this document authorises a designated individual to represent the trust during the registration process.
• Consent Letter from Landlord: If the trust’s registered office is located in a rented space, a letter of consent from the landlord confirming their permission to use the premises is mandatory.
• No-Objection Certificate (NOC): An NOC from the local authorities or municipal body verifying that there are no objections to using the specified premises as the registered office of the trust.

Procedure for Registration of Charitable Trust

• Step 1 - Choose a Name for the Trust: Select a unique name for the trust that is not already in use to avoid trademark infringement.
• Step 2 - Draft the Trust Deed: Prepare a detailed trust deed outlining the charitable purpose, rules and governance structure of the trust.
• Step 3 - Appoint Trustees: Identify at least three trustees who will manage the trust. Collect valid proof of their identity and address.
• Step 4 - Secure a Registered Office Address: Arrange a registered office for the trust and ensure it complies with local authority requirements. Obtain the necessary landlord consent or proof of ownership.
• Step 5 - Prepare and Submit Documents: Gather the required documents, as we mentioned in the previous section.
• Step 6 - Verification and Approval: Wait for the Registrar to review the submitted documents. Upon successful verification, the registration will be approved.
• Step 7 - Obtain Certificate of Registration: Once approved, collect the registration certificate issued by the Registrar of Societies or the Registrar of Trusts.
• Step 8 - Set Up Bank Account and PAN: Open a bank account in the trust's name and apply for a Permanent Account Number (PAN) for the organisation.
• Step 9 - Register Under Sections 12A and 80G: Apply for registration under Sections 12A and 80G of the Income Tax Act through the Income Tax Portal. These registrations enable tax exemption for both trust and donors. CTA
• Step 10 - Commence Operations: Begin fundraising and conducting charitable activities as per the rules. Ensure adherence to regulatory and compliance requirements at all stages.

Changes in the Form 10A and 10B

• Alternative ID Requirements: If PAN or Aadhaar of the concerned person is unavailable to include in rows 9a and 9b, alternative identification such as Passport number, Elector’s photo identity number, Taxpayer Identification Number (TIN) of the country of residence, Driving License number, or Ration Card number can now be provided.
• Details of Additional Registrations: Applicants must now disclose registrations under the FCRA Act, the DARPAN Portal, or any other relevant provisions of the Income Tax Act.
• Integration of Form 10G with Form 10A/10AB: Previously, Form 10G was used for 80G registration. The same can be applied within Form 10A or 10AB, depending on the specific circumstances.
• Religious Activity Disclosure: Applicants must provide details of Income and Expenditure related to any religious activity conducted by the organisation.
• Assets, Liabilities and Income Details: Comprehensive information on the trust’s Assets, Liabilities and Income must be furnished as part of the application process.

Conclusion

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