Charitable Trust

To start a charity trust, you need to:

1. Determine the assets you want to add to the trust.
2. Decide on your beneficiaries and whether you want the trust income to pay them or the organisation first.
3. Work with a professional to draw up a trust document.

Yes, a charitable trust can earn income. Charitable remainder trusts are irrevocable trusts that let you donate assets to charity and draw annual income for life or for a specific time period. The trust’s investment income is exempt from tax, and if the trust sells trust assets, that sale is also tax exempted.

Trusts and NGOs work towards improving society, but they operate differently. Trusts, which can be either public or private, are not dependent on governmental initiatives and have their own policies. They often work in areas like education, medical aid, and labour. On the other hand, NGOs usually assist the government with initiatives that are outside the scope and capabilities of the government.

Charitable organisations are not required to have any members, but if there are individual members, there must be at least three.

Yes, a single person can form a trust. One person can act as the settlor, trustee, and beneficiary. For example, a person can create a trust, put the property in it, make themselves the trustee, and use the property for their own benefit.

There are four main types of trusts:

1. Living trusts are created while the trustor is alive.
2. Testamentary trusts, set up after death according to the trustor’s will.
3. Revocable trusts can be altered or cancelled by the trustor.
4. Irrevocable trusts cannot be altered or cancelled without the beneficiary’s permission.

To start a private charitable trust in India, you need to:

Obtain a certificate of registration from the tax authorities.

Register your trust with the appropriate state or central government agency.

A trust is created by a settlor, who transfers some or all of their property to a trustee. The trustee then holds that property in trust for the beneficiaries. The rules of a trust depend on the terms under which it was created.

Trust registration is optional in all states. Only three states require trust registration, but even in those states, there are no legal consequences or penalties if you don’t register.

To start a charity alone, follow these steps:

Determine the name of the organisation.

Draft and file the articles of incorporation.

Appoint the board of directors.

Draft the bylaws and conflict of interest policy.

Take the initial board actions.

Obtain an employer identification number (EIN).

The benefits of a charitable trust include:

Tax Benefits: Charitable trusts offer tax deductions for income tax purposes and remove assets from the taxable estate.

Asset Preservation: Charitable trusts can preserve highly appreciated assets.

Legacy Creation: A charitable trust can foster an ethic of giving in younger generations.

Yes, a charitable trust can make a profit. Charities can sell assets that don’t produce income in a charitable trust to buy income-producing assets. Since charities don’t pay capital gains tax, the proceeds remain in the trust tax-free. It is possible to choose to collect a constant income from your trust each year.

A charitable trust is a legal entity that holds and manages assets. However, the beneficiary of a charitable trust is not any one individual or group but the public at large. Therefore, an individual beneficiary of a charitable trust has no legal standing to enforce the terms of the trust.

An example of a charitable trust could be a trust set up to leave a house to the local town to use as a community center. The trust would hold the house and oversee its use and caretaking even after the death of the person who set up the trust.

In India, a charitable trust is subject to tax on its income. The trust should pay tax on the maximum marginal rate. For Assessment Year 2020-21, the rate was 42.744%. The rate is applicable only on that part of the income, which is not applied towards charitable or religious purposes in India. To be exempt, a trust is required to apply at least 85% of its income to charitable or religious purposes in India.

A charitable trust is controlled by the donor, who maintains control over the properties in the trust. The proceeds from earned interest or gains either go to the charity or are split between the charity and the donor’s beneficiaries.

Yes, a charitable trust can be considered an NGO. NGOs aid the government with programs they can’t already do, while trusts are not dependent on the government. However, unlike NGOs, trusts cannot receive financial assistance from the government.

Charitable organisations, including charitable trusts, are not required to have any specific number of members. The number of members can vary based on the trust’s specific needs and structure.

Charities, including charitable trusts, do not have “owners” in the traditional sense. Instead, they have stakeholders who have an interest in the organisation but do not own it. The stakeholders’ position relative to the charity is quite different from, say, a for-profit corporation’s shareholders.

Yes, in most cases, a charitable trust can sell its property. However, it’s important to note that the sale of trust property may be subject to specific rules and regulations and in some cases, may require prior approval from the court or relevant authorities.

Charitable trusts in India are governed by the Indian Trusts Act, 1882, and various relevant state Acts. They 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.

Charitable trusts fall into two primary categories: charitable lead trusts and charitable remainder trusts. These trusts serve different needs and are chosen based on the specific objectives of the donor.

In India, a charitable trust is required to apply at least 85% of its income to charitable or religious purposes to be exempt from tax. The tax rate for trusts is 5% for income up to ₹2,50,000, 20% for income from ₹5,00,000 to ₹10,00,000, and 30% for income above ₹10,00,000.

Yes, a charitable trust in India can engage in business activities, provided that these activities are incidental to the main objectives of the trust. However, to be exempt from tax, a trust is required to apply at least 85% of its income to charitable or religious purposes.

Yes, a trust in India can give donations. However, it’s important to note that if such a donation is an “anonymous donation”, it may be taxable in the hands of the Public Charitable Trust at 30% if it is not a religious trust.

In India, charity trustees have the legal responsibility to manage, govern, and control the charity. They hold legal title to the trust’s assets on behalf of the trust. Their powers include setting the charity’s strategy and objectives, ensuring compliance with legal requirements, and making key decisions to help the charity meet its objectives.

The rules of a charitable trust in India are governed by the Indian Trusts Act, 1882. The trust must be created for a lawful purpose and the trust property must be clearly defined. The trust deed should specify the objective of the trust, the beneficiaries, and the manner in which the trust property is to be managed.

The two primary types of charitable trusts are charitable lead trusts and charitable remainder trusts. These trusts serve different needs and are chosen based on the specific objectives of the donor.

NGOs are voluntary organisations that often aid the government with programs that they can only sometimes do in their extent and strength. Trusts, on the other hand, are not dependent on the government’s programs and operate based on their own set of rules.

A charitable trust, also known as a public trust, is an express trust created for a charitable purpose. If an express trust is not a charitable trust, it is deemed to be a private trust. A private trust is an express trust created to benefit a few persons.

Charitable trusts in India are subject to income tax in accordance with the rules set by the Income Tax Act. The tax rates applied on charitable trusts are not standard and can vary based on the specific circumstances of the trust.