Trust Deed Format

Trust deed
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A trust deed is a legal document that establishes a trust, detailing its objectives, trustees, beneficiaries, and other essential provisions. In India, trusts are primarily governed by the Indian Trusts Act, 1882, in the case of private trusts, and state-specific Public Trust Acts for public charitable trusts.

Drafting a well-structured trust deed is crucial for the proper functioning and legal recognition of the trust. This guide provides an in-depth overview of the trust deed format, the process of drafting and registering a trust deed in India, and the key legal considerations involved.

Understanding a Trust in India

A trust is a legal arrangement in which the owner (settlor) transfers property to a trustee to manage for the benefit of specific persons (beneficiaries) or a cause. Trusts are classified into:

  • Public Trusts – Created for charitable or religious purposes.
  • Private Trusts – Created for private beneficiaries, such as family members.

Key Elements of a Trust Deed

A trust deed serves as the constitution of a trust and must include:

  1. Name of the Trust
  2. Settlor (Founder) Details
  3. Trustees and Their Powers
  4. Beneficiaries
  5. Objective of the Trust
  6. Management of Trust Property
  7. Mode of Dissolution (if applicable)

Trust Deed Format in India

A general format for a trust deed:

Step 1: Define the Trust's Objectives

Before drafting the trust deed, clearly define:

  • Purpose of the trust
  • Trust beneficiaries
  • Assets being assigned to the trust

Step 2: Prepare the Trust Deed

  • Use the format above to draft the deed.
  • Clearly specify the rights, responsibilities, and powers of the trustees.

Step 3: Choose Trustees

  • A minimum of two trustees is required.
  • Trustees should be capable of managing the trust’s affairs effectively.

Step 4: Stamp Duty Payment

  • The trust deed must be executed on stamp paper of a prescribed value.
  • Stamp duty varies by state (e.g., ₹500 in Delhi, 2% of trust property value in Maharashtra).

Step 5: Trust Deed Registration

  • Visit the Sub-Registrar’s Office in the relevant jurisdiction.
  • Submit:
    • The original trust deed.
    • Two witness signatures.
    • Identity proofs of the settlor and trustees.
    • Proof of address of the trust’s registered office.
  • Pay the registration fees (varies by state).
  • The deed is recorded and a certified copy is issued.

Step 6: Apply for PAN and Bank Account

  • Obtain a PAN Card for the trust from the Income Tax Department.
  • Open a bank account in the trust’s name for financial transactions.

Step 7: Compliance with Income Tax Laws

  • Public charitable trusts should apply for 80G and 12A registrations under the Income Tax Act to avail tax exemptions.
  • Annual filings are mandatory for tax compliance.

Legal Considerations in Drafting a Trust Deed

  • Irrevocability: Public trusts are usually irrevocable, while private trusts may have dissolution clauses.
  • Trust Property Management: Clearly mention how the assets will be utilized.
  • Dispute Resolution: Specify the mechanism for resolving trustee disputes.
  • Amendments: Outline the procedure for amending the trust deed in case of future changes.

Conclusion

Drafting a trust deed in India requires careful consideration of legal, financial, and operational aspects. A well-drafted trust deed ensures smooth governance and compliance with legal requirements. Whether forming a charitable trust or a private trust, following the proper drafting and registration procedures is crucial for its successful operation.

If you are unsure about any aspect of trust deed drafting, consulting a legal expert is advisable to ensure compliance with applicable laws and regulations.

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