Private Trust Registration Process in India: Is Registration Compulsory?

Is registration of a private trust compulsory in India?

It depends on what the trust holds. If a private trust holds immovable property, such as a flat or land, registration of the deed is compulsory, because Section 5 of the Indian Trusts Act, 1882 says no trust in relation to immovable property is valid unless it is declared by a non-testamentary instrument in writing, signed by the author of the trust or the trustee and registered, or by the will of the author or the trustee. If the trust holds only movable property, such as cash or shares, the trust is valid either if declared in the same way or if ownership of the property is transferred to the trustee, so a registered deed is not the only way. There is no separate registration of a private trust with the Charity Commissioner or any similar authority.

This post stays on the registration process for a private trust.

What does the Registration Act say?

Two sections of the Registration Act, 1908 explain why immovable property changes the answer.

• Section 17(1)(b) makes registration compulsory for non-testamentary instruments that purport or operate to create, declare, assign, limit or extinguish any right, title or interest in immovable property of the value of one hundred rupees or more. A deed that settles a flat on trustees does this.
• Section 18 lists documents for which registration is optional. These include non-testamentary instruments (other than wills) that operate on an interest in movable property.

Taken together: a deed that declares a trust over immovable property must be registered, a deed that deals only with movable property may be registered but need not be, and a trust declared by will does not need registration under Section 5. Whether any other legal point applies to your particular property, for example agricultural land, should be checked with an advocate.

What is the private trust registration process, step by step?

1. Fix the structure. Name the settlor (the author), the trustees, the beneficiaries, what each beneficiary receives, how a trustee is replaced, and when the trust ends.
2. Draft the trust deed. Describe the trust property exactly. For a flat, use the description from the title papers. For shares or deposits, list the folios or account numbers.
3. Pay the stamp duty. Duty is set by each state. In Maharashtra, Article 61 of Schedule I of the Maharashtra Stamp Act deals with a declaration of trust. In the consolidated text of the Act, a trust made for a religious or charitable purpose with a disposition of property is charged at two per cent of the amount settled or the market value of the property settled, while any other trust is charged the same duty as a conveyance on that value, and a declaration with no disposition of property is charged at a fixed Rs 500. Rates change, so check the current rate before you buy stamp paper.
4. Sign the deed. The settlor and trustees sign. Witnesses sign if your sub-registrar's office asks for them.
5. Present it for registration. Under Section 23 of the Registration Act, a document other than a will must be presented to the proper officer within four months from the date of execution. A deed presented later can be refused.
6. Hand over the property. Registration of a deed that merely declares a trust does not itself move shares or money. Transfer shares into the trust's demat account, pay money into the trust's bank account and complete the transfer of title for immovable property.
7. Set up the trust's records. Open a bank account in the trust's name and keep its accounts. Ask a chartered accountant how the trust's income will be taxed and whether a PAN in the trust's name is needed.

A hypothetical to show what needs registration

This is an invented example. Mr Rao wants his flat in Navi Mumbai and Rs 10 lakh of fixed deposits held for his daughter, with his brother as trustee.

• The flat is immovable property, so the trust deed that declares it must be signed and registered under Section 5.
• The fixed deposits are movable property. They would be validly held if the deed is registered, or if ownership is transferred to the trustee, for example by re-issuing the deposits in the trustee's name.
• If Mr Rao signs the deed but never presents it, the trust over the flat is not valid under Section 5, and the flat remains his. That matters for his estate, since the flat would then pass under his will or the law of succession rather than under the trust.

What papers should you carry to the sub-registrar?

This is a general checklist, since offices follow their own practice.

• The original stamped trust deed, with the stamp paper or e-payment receipt.
• Identity and address proof of the settlor, each trustee and the witnesses, with photographs.
• Title documents of any immovable property: the last registered deed, the share certificate or society records for a flat, and recent property tax or utility proof.
• A list of movable property being settled, with account or folio details.
• Evidence of valuation if the duty depends on market value.

How is a private trust different from a public charitable trust?

A private trust benefits named people, and registration depends on the property rule above. A public charitable trust in Maharashtra is a separate matter: it is registered with the Charity Commissioner under the Maharashtra Public Trusts Act, 1950. Our page on family and charitable trust registration covers both kinds. For someone giving money to a trust, our guide on checking a trust before donating is more useful.

How can you estimate the stamp duty before you go?

Use our stamp duty calculator as a starting point, then confirm the figure for a trust deed with the office or an advocate, because the rate for a trust deed differs from a sale deed.

This is general information, not legal advice.