Procedure trust Registration

I. Summary
A. TYPES OF ORGANIZATIONS
1. Trusts
Public charitable trusts can be established for a number of purposes, including the relief of poverty, education, medical relief, provision of facilities for recreation, and any other object of general public utility. Indian public trusts are generally irrevocable. No national law (except the broad principles of the India Trusts Act 1882, which governs private trusts) governs public charitable trusts in India, although many states (particularly Maharashtra, Gujarat, Rajasthan, and Madhya Pradesh) have Public Trusts Acts.
2. Societies
Societies are membership organizations that may be registered for charitable purposes. Societies are usually managed by a governing council or a managing committee. Societies are governed by the Societies Registration Act, 1860, which has been adapted by various states. Unlike trusts, societies may be dissolved.
3. Section 25 Companies
A section 25 company is a company with limited liability that may be formed for "promoting commerce, art, science, religion, charity or any other useful object," provided that no profits, if any, or other income derived through promoting the company's objects may be distributed in any form to its members.
B. TAX LAWS
India’s tax laws affecting not-for-profit organizations (NPOs) are similar to the tax laws of other Commonwealth nations.
The income of certain NPOs carrying out specific types of activities is exempt from corporate income tax, with the caveat that unrelated business income is subject to tax under certain circumstances.
India also subjects certain sales of goods and services to VAT, with a fairly broad range of exempt activities. The rates range from 1 percent to 12.5 percent, with most goods and services taxed at 12.5 percent. VAT liability arises only if the total turnover of sales is Indian Rupees (Rs.) 500,000 (Rs.100,000 if the dealer is an importer).
The income tax law and the corporate tax law provide tax benefits for donors. India and the United States have signed a double taxation treaty.
Finally, NPOs involved in relief work and in the distribution of relief supplies to the needy are 100% exempt from Indian customs duty on the import of items such as food, medicine, clothing and blankets. Other exemptions may also be available.
II. Applicable Laws
•             Constitution of India;
•             Income Tax Act, 1961;
•             Public Trusts Acts of various states;
•             Societies Registration Act, 1860;
•             Indian Companies Act, 1956, section 25;
•             Foreign Contribution (Regulation) Act, 1976;
•             Maharashtra Value Added Tax Act, 2002, as amended by Act No. IX of 2005.
Other legal authorities consulted in preparing this Note:
Noshir H. Dadrawala's "IRNL Country Report on the Framework Governing Not-for-Profit Organizations in India"
Noshir H. Dadrawala's "Report on Indian Finance Bill 2006"
III. Relevant Legal Forms
A. GENERAL LEGAL FORMS
The right of all citizens to form associations or unions is guaranteed by the Constitution of India, Article 19(1)(c).
There are three pertinent legal forms of not-for-profit entities under Indian law: trusts, societies, and section 25 companies (cooperatives and trade unions are mutual benefit organizations, and as such, are not discussed in this Note). Many state and central government agencies have regulatory authority over these not-for-profit entities. For example, all not-for-profit organizations are required to file annual tax returns and audited account statements with various agencies. At the state level, these agencies include the Charity Commissioner (for trusts), the Registrar of Societies (referred to in some states by different titles, including the Registrar of Joint Stock Companies), and the Registrar of Companies (for section 25 companies). At the national or federal level, the regulatory bodies include the income tax department and Ministry of Home Affairs (only for not-for-profit organizations receiving foreign contributions).
1. Trusts
Public charitable trusts, as distinguished from private trusts, are designed to benefit members of an uncertain and fluctuating class. In determining whether a trust is public or private, the key question is whether the class to be benefited constitutes a substantial segment of the public. There is no central law governing public charitable trusts, although most states have "Public Trusts Acts." Typically, a public charitable trust must register with the office of the Charity Commissioner having jurisdiction over the trust (generally the Charity Commissioner of the state in which the trustees register the trust) in order to be eligible to apply for tax-exemption. In general, trusts may register for one or more of the following purposes:
•             Relief of poverty or distress;
•             Education;
•             Medical relief;
•             Provision of facilities for recreation or other leisure-time occupation (including assistance for such provision), if the facilities are provided in the interest of social welfare and public benefit; and
•             The advancement of any other object of general public utility, excluding purposes which relate exclusively to religious teaching or worship.
At least two trustees are required to register a public charitable trust. In general, Indian citizens serve as trustees, although there is no specific prohibition against non-natural legal persons or foreigners serving in this capacity.
Legal title of the property of a public charitable trust vests in the trustees. Trustees of a public charitable trust may not, however, in any way use trust property or their position for their own interest or private advantage. Trustees may not enter into agreements in which they may have a personal interest that conflicts or may possibly conflict with the interests of the beneficiaries of the trust (whose interests the trustees are bound to protect). Trustees may not delegate any of their duties, functions or powers to a co-trustee or any other person, except that trustees may delegate ministerial acts. In essence, trustees may not delegate authority with respect to duties requiring the exercise of discretion.
Trustees of religious or charitable trusts are charged with discharging their duties with the degree of care that an ordinarily prudent person would exercise with respect to his personal property. Public charitable trusts are highly regulated. For instance, in many states, purchases or sales of immovable property by a trust or taking a loan must be approved in advance by the Charity Commissioner.
Indian public charitable trusts are generally irrevocable. If a trust becomes inactive due to the negligence of its trustees, the Charity Commissioner may take steps to revive the trust. Furthermore, if it becomes too difficult to carry out the objects of a trust, the doctrine of cy pres, meaning "as near as possible," may be applied to change the objects of the trust.