The 1882 Trusts Act is the main law providing for the creation of trusts in India. It provides for the activities such entities can complete and the way they can be registered in this country.
There are several types of trusts that can be established in this jurisdiction, and our Indian company formation agents present their main characteristics. Should you decide to open a trust in India, we can assist you.
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Definition and means of creation for an Indian trust
The law defines the trust as a relation established at the moment the settlor enables a trustee to hold various assets on behalf of one or more beneficiaries. In order to open a trust in India, a trust agreement must be drafted and registered with the Registrar of Trusts.
All types of trusts must be registered with this authority, especially since such establishments can be created for various purposes. Our company registration specialists in India can offer detailed information on the incorporation process for such entities.
Participants in a trust in India
The first aspect to consider before drafting the trust agreement is to establish the participants. To be more precise, the foundation deed cannot be drawn up without knowing:
- the settlors who are the parties deciding the establishment of the trust and the assets to be held in it;
- the trustee who is the administrator of the trust and who must respect the indications of the settlor;
- the beneficiary(ies) who are the parties to own the assets held in trust at the time the settlor decides.
All parties must be identified with names and other details when opening a trust in India. Please note that a trust must have at least 2 settlors.
Types of trusts recognized in India
There are several types of trusts that can be set up in India. These are:
- the public trust;
- the private trust;
- the public-private trust;
- the family trust.
Indian private trusts are created under the 1882 Trusts Law and can fulfil various activities on behalf of people and business associates. Such trusts also allow for a family relationship between the settlor and the beneficiaries.
Public trusts are usually created for the benefit of a community. It can undertake various activities, among which charity, education, religious-related operations. Such trusts fall under the governance of the following laws:
- the 1863 Religious Endowments Act;
- the 1920 Religious Trust Law;
- the 1950 Bombay Public Trust Act;
- the 1860 Societies Registration Law.
In India, the most common types of trusts are charities and religious-related ones.
The third type of Indian trust, namely the public-private one, can serve both private and public benefits.
There is also the family trust, which is employed as an asset protection or inheritance tool. The settlor is usually the head of the family who decides to create the trust in order to ensure his/her estate is distributed according to his/her wishes.
No matter the type of trust you want to open in India, you can rely on our local consultants. They can also help you draft and file the necessary documents with the Indian Register of Trusts.
Tax benefit for trusts in India
There are many benefits that will make you want to open a trust in India. One of the most important is taxation, or better said the financial advantages such an entity offers. Here are some of them:
- it can apply for tax exemptions for certain income, among which donations;
- income from immovable property can benefit from 15% tax exemptions when held by religious trusts;
- capital gains can also benefit from exemptions under certain circumstances.
Our accountants in India can offer more information on this aspect. At the same time, if you have employees, they can also offer payroll services in India. So, do not hesitate to contact us for more information.