In India, non-profit organizations are commonly known as Non-Governmental Organizations (NGOs) or Section 8 Companies (under the Companies Act). These organizations operate without the primary goal of making a profit, and their activities are usually focused on social welfare, charitable work, environmental conservation, education, healthcare, and other similar causes. Here are some types of non-profit organizations in India:

1)    Trusts: A trust is a legal entity where the trustees hold property and manage it for the benefit of specific individuals or the general public. Trusts in India are governed by the Indian Trusts Act, 1882.

2)    Societies: Societies in India are registered under the Societies Registration Act, 1860. They are generally formed for the promotion of literature, science, art, education, charity, and other similar purposes. Societies are managed by a governing body elected by its members.

3)    Section 8 Companies: These are companies formed under Section 8 of the Companies Act, 2013, for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other charitable object. Section 8 companies can apply for a license under this section, allowing them to function as non-profit entities.

4)    Nonprofit Associations: Apart from the specific legal structures mentioned above, there are various other forms of non-profit entities that may not fall precisely under the Trusts, Societies, or Section 8 Companies categories.

NGOs and non-profit organizations play a crucial role in addressing social issues, providing support to marginalized communities, and contributing to the overall development of the country. It's important to note that these organizations are subject to regulations and compliance requirements set by the government to ensure transparency and accountability in their operations.

In this article we will majorly talk about Trust.


A Trust is a type of legal arrangement in which the creator of the trust (known as settler / author of the trust) entrusts any property to another person, or another legal entity (known as trustee), for its management and on his behalf. A Trust is created for a third person, known as the beneficiary. The beneficial interest in the Trust property lies entirely in the beneficiary, and the trustee holds the Trust property for the beneficial interest of the beneficiary only. A Trust is usually created by an Instrument of Trust, which may be a legal document enforcing the trust, often known as the Trust Deed.

Thus the key terms with respect to the creation of a Trust are:

·       Author/ Settler

·       Trustee

·       Beneficiary

·       Instrument of trust

·       Beneficial interest

·       Trust property


Types of trusts

 Trusts can be divided on the following basis:

1.     Express / Implied Trusts – An express Trust is made by the direct act of the Settler or Author. This may be an instrument of Trust, such as a Trust deed, or by intentional declaration of the creation of such Trust by the Settler.

Implied Trust is not explicitly declared by the Settler. The Court deduces the existence of such a Trust from the actions of the parties or circumstances surrounding the transaction. For example, if the Settler purchases a property using his own funds but puts the title in the Trustee’s name, and there is no explicit declaration or written agreement (such as a Trust deed) for the trust.

2.     Public / Private Trusts

a.     A public Trust is one that is created for the benefit of the public in general. It is established with the aim of promoting social or public welfare and may be designated for any specific charitable purpose. Public trusts often involve assets or resources dedicated to addressing broader societal needs. For example, some Companies establish a trust fund to support education initiatives in underprivileged communities – providing scholarships, educational resources, and facilities for the advancement of public education. Public Trusts in India are further either of the following types:

                                          i.         Charitable Trusts – A charitable Trust has secular objectives aimed at benefiting the public at large. These trusts focus on contributing to social welfare, humanitarian causes, and the overall betterment of society. Charitable trusts often involve activities such as education, healthcare, poverty alleviation, and environmental conservation. For example, the establishment of a charitable trust to provide free medical services, distribute food to the needy, and support educational programs for underprivileged children.

                                         ii.         Religious Trusts – A religious trust is created for non-secular objectives, with the primary purpose of advancing and promoting religious or spiritual activities. These trusts manage and oversee the assets dedicated to religious institutions, rituals, and the support of religious communities.

For example, the creation of a religious trust to maintain and develop a temple, organize religious events, and provide for the needs of priests and devotees following a specific religious tradition. The Tirumala Tirupati Devasthanams is a Hindu religious Trust that manages the famous Sri Venkateswara Temple in Tirumala, Andhra Pradesh. A Waqf is also a form of religious Trust, where an individual or entity dedicates assets like land, buildings, or funds. Waqfs have helped develop and support mosques, schools, hospitals and other community initiatives.

b.     A private Trust is created by an individual or an entity for the benefit of a particular person or persons only. In private Trust, it is essential that the beneficial interest must vest in the beneficiary within the lifetime of one or more persons living at the date of the creation of the Trust and the minority of the Beneficiary. That is, the rule against perpetuity as provided for under Section 14 of the Transfer of Property Act, 1882 holds good for a private Trust.

An example of a private Trust is a family Trust, wherein the Author creates a private trust to manage and distribute assets for the well-being and financial support of his children or dependents, outlining specific conditions for the use of the trust funds such as education, healthcare, and housing expenses.

A private trust may be:

·       Revocable,

·       Irrevocable non-discretionary, or

·       Irrevocable discretionary.

3.     Constructive trust – it is imposed by the Court as a remedy for unjust enrichment. For example, two individuals are in a business partnership, and they jointly purchase a piece of land for the business. The legal title is held in only one individual’s name. If the other partner can show that it was understood between them that she would have a share in the property's ownership, a constructive trust may be implied to recognize her equitable interest.


The parties to a trust are three - settler, trustee, beneficiary

1.     The settler must not be a minor. He must be of sound mind.

2.     The trustee also must not be a minor. He must be of sound mind. He must not be insolvent, and must be a party capable to contract. It would be pertinent to note that a trustee can reject his trusteeship by refusing to act as a trustee and must be discharged.

Main objectives of a trust –

The primary objective of establishing a Trust is to safeguard the interests of beneficiaries beyond the lifetime of the settler. Trusts are principally designed for the effective management and preservation of assets. In addition to providing a mechanism for prudent asset management, trusts offer a valuable tool for minimizing inheritance taxes. Beyond individual use, trusts serve as a strategic instrument for employers, enabling them to create retirement trusts that ensure the financial well-being of their employees post-retirement. Thus, trusts serve a multifaceted role, not only as a means of asset protection and distribution but also as a tax-efficient and forward-thinking strategy for individuals and organizations alike.


The assets encompassed within a trust can take the form of either movable or immovable property.

Ø  In the case of movable property, the act of delivering the property to the trustee is adequate to establish the existence of a trust.

Ø  In contrast, when dealing with immovable property, the establishment of a trust necessitates the creation of a written document, commonly known as a trust deed, duly signed by the settlor. It's noteworthy that while a stamp is not obligatory for the trust deed, its execution relies on the authenticity and clarity of the written document. Additionally, in instances where a trust is formed through a testamentary document, such as a will, the registration of the trust deed is not mandated, streamlining the process for testamentary trusts and allowing flexibility in the manner in which they are established and administered.

Acts regulating trusts in India

Laws governing trusts in India are categorized based on the nature of the trust, distinguishing between public and private trusts. These statutes provide a legal framework to ensure the proper functioning and regulation of trusts across the country.

1.     Public trusts

a.     Charitable and Religious Trusts Act 1920 – This act specifically addresses the legal aspects of charitable and religious trusts, setting guidelines for their establishment, administration, and dissolution.

b.     Religious Endowments Act 1863 –  Focused on the regulation of religious endowments, this act outlines provisions for the proper management and governance of assets dedicated to religious purposes; and

c.     Charitable Endowments Act, 1890 – Geared towards charitable endowments, this act delineates the legal parameters for the functioning and supervision of trusts dedicated to charitable causes.

2.     Private trusts

a.     Indian Trusts Act 1882 – This comprehensive legislation governs private trusts in India, offering a comprehensive legal framework for the creation, administration, and dissolution of trusts. It covers various aspects, including the rights and duties of trustees and beneficiaries.

Creation of a trust - Trust Deed

The creation of a trust is formalized through an important legal instrument known as the Trust deed. This document serves as a binding agreement, providing clarity on essential aspects of the structure of the trust.

1.     Trust Deed Essentials: The trust deed must articulate essential elements, including identification of the trust property, the purpose or objective of the trust, and a clear delineation of beneficiaries and trustees. This ensures transparency and adherence to the objectives.

2.     Distinct Entity - PAN and Bank Account: As a separate legal entity, the trust requires its own Permanent Account Number (PAN) and a dedicated bank account. The settler contributes to or invests in the trust by making gifts in the trust's name, facilitating the financial operations and activities of the trust.

3.     Execution and Submission: The trust deed, executed on non-judicial stamp paper, is formally submitted to the Registrar of Trusts along with the prescribed fee. At the district level, the formal establishment of a trust occurs at the collectorate, signifying a pivotal milestone in the initiation of the trust's operations.

4.     Registration Requirements:

Ø  For non-testamentary instruments, such as private trusts, registration becomes imperative under Section 17 of the Registration Act. This process ensures legal validity and recognition.

Ø  Registration is not mandatory for movable property held within the Trust.

Ø  In the case of charitable trusts, which fall under the category of public trusts, registration is optional, offering flexibility in the registration process, whether established inter vivos or through a testamentary instrument.

The procedure for registration of a trust

This procedure ensures a thorough and transparent registration process, aligning with legal requirements and facilitating the potential benefits under relevant sections of the Income Tax Act.

1.     Preparation of a Trust deed

Drafting a trust deed, though not obligatory, is a recommended step in formalizing the trust's structure and objectives.

2.     Essential particulars of a Trust deed

A comprehensive Trust deed must contain the following

a.     Involvement of at least three parties: Author/Settler, Trustee, Beneficiary

b.     Settler's detailed information, including name and address.

c.     Clear articulation of the trust's purpose or objective.

d.     Detailed information about the trustee, specifying the minimum and maximum number of trustees.

e.     Specifics about the beneficiaries.

f.      Well-defined rules governing the trust.

g.     Details about the trust property.

3.     Registration of deed (of a charitable or religious Trust)

Registration of the trust deed is generally not mandatory but becomes necessary for availing exemptions under sections 80G and 12A of the Income Tax Act.

a.     The process involves submitting the trust deed to the local Registrar of Trust by filling Form 10A online via the income tax portal.

b.     Digital signature or electronic verification certificate (DSC or EVC) is a requisite for this process.

4.     Documents required for registration of a trust deed (of a charitable or religious trust)

a.     Memorandum of trust (self-certified copy of the trust deed)

b.     Copy of the registered deed

c.     If registered under another statute like the Foreign Contribution Regulation Act, then a copy of that registration

d.     Annual accounts and audit reports for the preceding three years if the trust was already in existence

e.     Accounts and tax audit reports of the applicant’s business of the applicant for the past 3 years (if applicable)

f.      Statement of declaration detailing the applicant’s activities

g.     PAN / Aadhaar of all trustees and the settler, accompanied by supporting documents like TIN, passport, EPIC, driving license, ration card etc.

Trust Registration  - Read More

Article by 

Khadija Firdaus

Intern at Corpzo