Charitable Trust is a trust which has the aim of charitable purpose. There are different types of organizations which may be established for a charitable purpose or they may acquire such purpose after its establishment. The following discussion present different types of charitable trusts in West Bengal and Kolkata and provides the procedures and steps for their formation.

Trusts are mainly non-profit organizations, but all non-profit organizations are not charitable organizations. One of the basic functions of a charitable trust is to provide benefit to the public at large by adopting different object clause or worthy causes and the measures these trusts take to help public are legal and policy made by them goes in tune with the public policy.

Charitable organizations raise their funds through conducting programmes or a campaign or donation or sponsor. These organizations or trusts use these funds for the welfare of the public. These trusts or organizations provide financial aid, medical services, public works, providing foods, education and so on and also work for the welfare of the society or improvement of the society. Before forming charitable trusts in West Bengal and Kolkata, you must be aware of their characteristics.

Characteristics of a Charitable Organisation:

1. Formal: A charitable trust should have objectives on which they will work and it should have rules and regulations for administrating the trust. The charitable trust must be registered.

 2. Private: Charitable organizations should be institutionally separate from the Government.

3. Self-governing: A charitable trust is controlled by the board of trustees of the trust and it is not controlled by the outside authority. A charitable trust or organization is a self-governing body.

 4. Not for profit: When a charitable trust earns profit it cannot distribute the profits instead it can earn and keep the profit as surplus.

 5. Voluntary: There is a need for voluntary participation in the programmes, management and activities for a trust to be classified as a charitable trust.

 6. Non-religious: A charitable trust or organization formed to help the public and has different object clause other than religious object then it cannot promote religious worship or religious education but a charitable trust or organization which has religious object clause, they can promote religious worship or religious education.

7. Non-political: A charitable trust or organization cannot be recognised or affiliated to political parties.

8. Works for public benefit: A charitable trust or organization should work for the benefit of the public and not for the private cause.

Constitutional Provisions with regard to Charitable Organisations in West Bengal and Kolkata:

“The Indian Constitution provides a distinct legal space to social capital / civil society institutions”

“(a) through its Article on the right to form associations or unions – Article 19 (1)(c);”

 “(b) through Article 43 which talks of States making an endeavor to promote cooperatives in rural areas; and”

“(c) through explicit mention in entries made in the Seventh Schedule. The Relevant Entries in the Seventh Schedule to the Constitution are as follows:”

 • “The Union List (List I)”

 “Entry 43 – “Incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations but not including co-operative societies”.

  “Entry 44 – “Incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one State, but not including universities.”

• “The State list (List II)”

 “Entry 32 – “Incorporation, regulation and winding up of corporations, other than those specified in List I, and universities; unincorporated trading, literary, scientific, religious and other societies and associations; co-operative societies”.

 • “The Concurrent List (List III)”

 “Entry 10 – “Trusts and Trustees”

“Entry 28 –“Charities and charitable institutions, charitable and religious endowments and religious institutions.

There is a constitutional right to form Associations under Article 19(1)(c) of the Indian Constitution so, it is possible to set up a non-profit or voluntary trust without registration or affiliation as mentioned above and some trust or community-based trust or organizations function in this way but when it claims deductions of tax under the tax law, they insist on formal registration.

Laws Governing Charitable Organisations in India:

Charitable trusts or we can say charities can be formed by many ways and perhaps it can be subjected to various acts of legislation. Article 19(1)(c) provides all citizens of India right to form associations or unions under the Constitution of India. Charitable trusts or organizations are subject of the Concurrent List of the seventh Schedule of the Constitution of India and these organizations are regulated by the States and the Centre. States and Centre are also competent to legislate these organizations.

There are different charitable organizations in India and their legal framework is quite complex. The legal frameworks depend on the form of business trust or organization takes.

When a charitable trust or organization is formed as a Public Trust, it will be governed by the Public Trust Act of that state and if there are no such laws in that state then it will follow Indian Trusts Act, 1882.

The Income Tax Act, 1961 is applicable to these charitable trusts under different provisions and the charitable trusts which get donations from foreign countries are regulated by the Foreign Contribution (Regulation) Act, 2010.

Private Trust:

A private Trust is one which includes beneficiaries like families or individuals. A Private trust classified as under – 

1. Beneficiaries and their requisite shares both can be determined
2. Both or either the beneficiaries and their requisite shares cannot be determined

Formation of Private Trust:

It is important to understand how private trusts can be formed in West Bengal and Kolkata. A private Trust is created by a will or by inter vivos.

 The following are required for forming a private trust –

1. “The existence of the author/settlor of the Trust or someone at whose instance the Trust comes into existence and the settlor to make an unequivocal declaration which is binding on him.”
2.  “There must be a divesting of the ownership by the author of the trust in favour of the trustee for the beneficial enjoyment by the beneficiary.”
3.  “A Trust property. iv. The objects of the trust must be precise and clearly specified.”
4.  “The beneficiary who may be a particular person or persons.”
5. “Unless all the above requisites are fulfilled, a trust cannot be said to have come into existence.”

A Trust deed of the charitable trust or organization contains the following: name or names of the author(s), settler or settlers of the trust; the name or names of the trustee(s); the name or names if any, of the beneficiaries or whether it shall be public at large; the name of the trust; address of the trust; objects of the trust; procedure of appointment, removal or replacement of a trustee, their rights, duties and powers, etc; the mode and method of determination of the trust etc.

Procedure for Registration of Trust:

1. You need the following before you register your Trust:
2. Trust’s name
3. Trust’s Address
4. Need to formulate objects of the trust
5. One settler of the trust
6. Two trustees of the trust
7. Property of the trust – movable or immovable
8. Now, prepare trust deed on stamp paper of the required value.
9. Requirements for registration of a trust deed with the Registrar Under the Indian Trusts Act, 1882 –
10. Trust deed on stamp paper
11. Copy of proof of identity of the settler and a passport size photo
12. Copy of proof of identity of each trustees and a passport size photo
13. Copy of proof of identity of each witnesses and a passport size photo
14. Signature of the settler on all the pages of the trust deed
15. Need two witness for the trust deed
16. Now, appear before the registrar and submit all the documents for registration and remember that settler and witnesses are required to be present before the registrar at the time of registration.
17. The registrar keeps the photocopy of the trust deed and returns the registered trust deed.

The above body explains the procedures that how to register trust and it also provides the necessary information required to register a trust. It also contains what documents have to be prepared for the registration and so on.

Public Charitable Trust:

Public Charitable trust is a trust which is created for the advancement of education, promotion of public health, relief of poverty and as a whole working for the benefit of the public at large termed as charitable in law is Public Charitable Trust.

Formation of Public Trust:

It is important to understand how public charitable trusts can be formed in West Bengal and Kolkata. Public trusts may be created inter vivos or by Will. There are three certainties required to create a charitable trust.

They are:

• “a declaration of trust which is binding on the settlor,”
• “setting apart definite property and the settlor depriving himself of the ownership thereof, and”
• “a statement of the objects for which the property is thereafter to be held, i.e. the beneficiaries. It is essential that the transferor of the property viz. the settlor or the author of the trust must be competent to contract.”

“In general, trusts may register for one or more of the following purposes:”

• “Relief of Poverty or Distress;”

• “Education;”

 • “Medical Relief;”

• “Provision for 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.”

The above explanation says about the formation of Public Trust and what is required to create a trust and for what purposes the trust would be registered.

Registration Process for Public Charitable Trust:

• Choose an Appropriate Name for the Trust
• Trust Deed
• Decide the Settlers or Authors and Trustees of the Trust
• Formulate Memorandum of Association (MOA) and Trust Deed of your Trust
• Documents Required to be Submitted at the Time of Registration
• Self-attested copy of the proof of identity of each trustee
• PAN card
• Proof of the registered office address of the Trust
• No Objection letter signed by the landowner
• Self-attested copy of the proof of identity of the settler
• Prepare Trust Deed on a Stamp Paper
• Submit the Trust Deed with The Registrar
• Obtain the Registration Certificate

After completing the above-mentioned instructions, the Registrar issues the certificate of registration.

12A and 80G Certificates:

A charitable trust or any NGO can get 12A and 80G certificates to avail tax deductions. Certificate 12A defines that trust is exempted to pay tax for the whole lifespan on its surplus income and an NGO should have an 80G certificate so that people who are donating for some good purpose of the society can get the facility of tax deduction.

Case Analysis:

“Aurolab Trust, Madurai vs Assessee on 30 December 2010 Income Tax Appellate Tribunal – Chennai”

This case says that the assessee was unable to follow the objects of the trust and was running a business which was not part of the object clause of the trust. So, the Commissioner of income tax cancelled their license and the competent authority said that the Commissioner took a good decision or passed a valid judgement after analysing the facts of the case and hence the case was dismissed.

 “Vignana Jyothi, Secunderabad vs Dit(Exemptions), Hyderabad, … on 26 April, 2017 Income Tax Appellate Tribunal – Hyderabad”

This case states that the trust raised capitation funds from the students which were directly connected to the admission of the students in the engineering college of the society. There was an issue raised against the trust that it does not carry the activities mentioned in the object clause of the trust and it is not running as a charitable institution. The license was cancelled by the Director of Income-tax which granted registration under 12A of the Income Tax Act and this order was challenged by the assessee or the trust. The court here found that the trust uses its fund to carry out its objectives. The registration was again granted to them.

Conclusion:

From the above discussion, it is evident that there are different procedures to be followed for registration of a charitable trust in West Bengal and Kolkata. This article provides all the necessary information about the process and steps to register a public charitable trust in West Bengal. A charitable trust is formed for the benefit of the public in the case of public trust and in case of private trust, benefit is gained by the families and individuals. So, before forming a trust, it is better to consult with a lawyer to avoid different problems and questions relating to the trust. If you need any assistance with forming charitable trusts in West Bengal and Kolkata, you can comment below or contact here.