Trust: Meaning and Types

Charitable Trust

Share this post

There are various modes available to register an entity to carry out social work in India. One of them is to form a trust for the benefit of public also called as Public Charitable Trust. To begin, it is very important to understand the meaning and types of trust which can be registered in India.

Meaning

A Trust is an arrangement in which a person(s) or entity is entrusted with a property (immovable or movable) which shall be utilized for the benefit of any other person or persons. In other words, trust is a kind of relationship in which one takes care of the property, exercise legal rights thereon and use it for the benefit of any other person or persons.

Person(s) or entity to whom the property is entrusted is called as Trustee(s) and the person(s) who gets the benefits of the property is/are called as Beneficiary(ies). Person who entrust the property to the Trustee(s) is called as Author/Settlor of the Trust. The following diagram illustrates the arrangement of a Trust. Trust Property can be anything such as a house, building, office, money or any other asset.

Trust forms a fiduciary relationship between the Author and the Trustee who shall use the entrusted property or exercise legal rights over the property for the benefit of the beneficiary. Fiduciary relationship is a relationship of trust wherein property in entrusted to a Trustee (Fiduciary) who shall have a fiduciary duty under the Trust to exercise ownership/legal rights on behalf of the Author for the benefit of the beneficiary(ies).

Types of Trust

The trust has been broadly classified as a Public Charitable Trust and a Private Trust

Public Charitable Trust

  • Its a type of trust formed for the benefit of public at large or where the beneficiaries cannot be ascertained is known as a public trust. It can be a charitable trust or a religious trust.
  • A Charitable Trust is formed for carrying out public welfare works such as child education, woman upliftment, education, sanitization, health services, cleanliness, environment protection and other social works. This form of trust is suitable to work as a nongovernmental organization (NGO).
  • A Religious Trust is formed for the benefit of particular religion. Such as trust for managing a temple, a mosque or for the betterment of a particular religion.
  • These trusts are essentially governed by public trust act of the state in which they are formed, the Indian Trusts Act, 1882, the Charitable and Religious Trust Act,1920 or the Religious Endowments Act, 1963 etc. In addition, religious trusts shall be governed by the Hindu Religious Institutions and Charitable Endowments Act, 1997 and Muslim Wakf Act, 1954 etc, as the case may be.
  • Further, there are various laws applicable on a a public charitable trust. It depends on the type and state in which its formed. For example, if a trust is formed in the state of Maharashtra, then it is regulated by the Bombay Public Trust Act, 1950, whereas a public charitable trust in Rajasthan is governed by the Rajasthan Public Trust Act, 1959.
  • Charity comes under the concurrent list of the constitution. If there is no Public Trust Act of a state, the public trust shall be legislated by the Indian Trust Act, 1882. For example, Delhi has no Public Trust Act of the state/UT. Thus, the provisions of Indian Trust Act, 1882 are applicable on the trusts formed in Delhi.

Private trust

A trust created for the benefit of one or more individuals that can be ascertained, identified or known. These trusts are accustomed to act as per the provision of the Indian trust Act, 1882

To know more about benefits and Income tax provisions related to a Public Charitable Trust, CLICK HERE

Leave a Reply

Your email address will not be published. Required fields are marked *