How a Trust is Run
Every Trust will have a group of Trustees, three or five or more, according to the provisions of the Trust Deed. The management and control of the Trust and all its assets is vested in these Trustees, who shall run the Trust according to the rules and procedure spelt out in the Trust Deed. There may be a Managing Trustee, for practical purposes, to run the Trust, on behalf of the Body of Trustees. It is expected that the Body of Trustees meets at least twice a year (or more frequently according to the need) and takes collective decisions in the matters of policy, activities and assets of the Trust, but keeping in mind the demands of 12A for tax exemption: Charitable Trusts are eligible for tax exemption under sections 11, 12, 12A, 12AA and 13 of the Income Tax Act. The term “charitable purpose” includes relief of the poor, education, medical relief, preservation of the environment and preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility.
After getting the Trust registered, the Trustees shall apply for and get a PAN (Permanent Account Number), which is needed for the income tax purpose. Now with the Trust Deed and the PAN in hand, the Trust can open a bank account in the name of the Trust, after passing a resolution regarding the same and its mode of operation. Simultaneously, the Trustees can apply for 12A, which entitles the Trust for exemption from income tax. This is the most important document from the income tax point of view. By granting income tax exemption through its 12A certificate, the Government officially recognizes the Trust as a Public Charitable Trust. The Trust, while filing its income tax returns, can claim income tax exemption, provided it follows the conditions necessary for the same, like following the clauses of the Trust Deed and complying with the sections 11, 12, 12A, 12AA and 13 provisions of the income tax. With the 12A in hand, the Trust may apply for 80G, which will give some income tax benefit to those who give donations to the Trust. In the meanwhile, the Trust may also have to apply for and get its TAN (Tax Account Number) and GST No, if it is applicable.
While running the Trust, it is important for the Trustees to note the following:
- A Public Charitable Trust with 12A certificate may not give any donation to another Trust without 12A certificate.
- A Public Charitable Trust may not give donation to another Trust, even with 12A certificate, if the latter’s objects are different from those of the donor Trust.
- A Public Charitable Trust may not take up any activity, however noble it may be, if it is not part of its objects in the Trust Deed.
It is also important for the Trust to maintain its membership and minutes register, with the agenda, proceedings, decisions and resolutions of the meetings recorded in it and the competent authority endorsing the same with his/her signature. Needless to say, the Trust has to maintain all its original documents like the Trust Deed, PAN card, 12A certificate, 80G certificate, land and property related documents, etc., in safe custody.
As the Trust functions, it is necessary to maintain its accounts with all supporting documents, get the accounts audited at the end of the financial year and file its income tax returns within the prescribed time frame.
Finally, a word of caution. The Trust may get in to great difficulties if any of its legal documents is lost, if the Trust is not run according to the provisions of its Trust Deed and even lose its 12A status if the legal compliances are not met.
In the next issue, we shall see the difference between a Trust, Society and Non-profit Company.
To subscribe to the magazine Contact Us
