Religious trust: Why You Should Register Yourself?

Have you visited any religious places recently? Once in a holy shrine, we do not hesitate to donate some money for their religious causes. But who manages these funds? These funds and the religious places are run by a religious trust. You may have various doubts about these religious trusts. We’ve got it all covered! 

Read below to find more! 

What is a trust?

A trust is a separate legal entity in the eyes of law. The meaning of trust is understood in its name itself. Speaking in layman’s terms, a trust is a confidence placed by someone in the trustee to deliver the trustor’s assets to the third party. 

A trust is a separate legal entity that has various rights similar to an individual or corporate entity. Trusts are formed to benefit the beneficiary. The property is transferred by the trustee to generate funds and utilize them for a reasonable cause. They are formed to provide legal protection to the wishes of the trustor. It puts the trustee under the obligation of managing and delivering the assets of the trustor for the benefit of the intended parties. 

Trusts are normally created when the settlor of the asset transfers the property for usage for public purposes. There are a few conditions that have to be fulfilled to form a trust: 

1. The person forming a trust should also create an undeniable declaration that can bind him.
2. There must be a transfer of a recognizable property.
3. The transfer should be irrevocable. 
4. The trustor must relieve himself of his rights as an owner. He must deprive himself of all the benefits and returns from the property. 
5. The objects and goals of the trust must be clearly defined. 
6. The beneficiaries of the trust must be specified. 

Types of trusts in India: 

Trusts are created for various objectives. These objectives are based upon the trustor’s wishes. These objectives might benefit various people. Depending upon the number of beneficiaries that can benefit from the trust, here are two types of trusts in India: 

Private trusts: 

A private trust is formed for a small enclosed group of people. The people in the group can be identified easily. 

Public trusts: 

Public trust is created for the public at large. Anyone can take advantage of the same. 

Now that we have understood trusts, let us understand what religious trusts are. 

What is a Religious Trust? 

A religious trust can be understood as trust that works towards the promotion and preservation of religious activities and religious institutions. The trust does not aim to earn any profit. It works towards the development and promotion of religious activities. It aims towards the upliftment of the religious institution. These institutions are generally formed by religious organizations. The activities performed by them are managed by the board of directors of trustees. The intuitions can be related to temples, mosques, and churches. They are responsible for providing services to the public at large. The institutions aim to provide help to the community at large. The institutions may also work towards spreading religious education in the society. 

A trust is formed based on a fiduciary relationship. Here, the trustor gives the trustee the right to manage his property for the benefit of a third party. In the case of a religious trust, any person benefiting from the institution’s religious activities is called the beneficiary of the trust. 

The trust gathers funds from devotees or donors who are willing to donate their assets in the form of cash, land, or any other form. If a trust receives any donation or funds that do not benefit it, it can transfer the same to any other trust having similar goals. 

Some laws govern religious trusts. These laws have laid the procedure for every transaction of the trust. The trusts cannot work outside the scope of these laws. Following these laws are essential for the management of religious trusts. They ease the working of the trust and help in financial management, utilization of donations, and performance of services. 

Trusts need to get themselves registered before they avail of any benefits. Religious trusts were earlier registered under section 12AA of the Income Tax Act. However, the religious trusts amendment brought changes in this registration process. Trusts now have to register under section 12 AB of the Income Tax Act. 

Religious Trust Act:

The Central Religious Trusts Act is not applicable in all states. States like Bihar, Orissa, and Madhya Pradesh have their acts that deal with the religious trusts in their state. Most of these acts prescribe similar rules and regulations. However, some variations may exist. 

The state and/or the beneficiaries of the trust can overlook the workings of the trust. The court can also look after the working of trust after the trust is held for the breach of public trust. Trusts can also opt for this option if they need the court’s legal guidance. The court is represented by the Advocate General or two or more people having some interest in the trust. Courts have the power to institute a suit to: 

1. Dismiss a trustee,
2. Appoint a new trustee,
3. Direct the old trustee to hand over a property in his possession to the person entitled to such property,
4. To a person who has ceased to be trustee to hand over a property in his possession to the person entitled to such property, and
5. Direct and manage accounting inquiries. 

Difference between Charitable trusts and Religious trusts. 

The charitable and religious trusts are governed under the Charitable and Religious Trusts Act 1920. Even though these trusts look similar there are significant factors that can differentiate between the two. This is because the goals of both these trusts are different. Their management structure is different. 

Religious trusts aim to support religious organizations and their services like the development of the place of worship whereas charity places their emphasis on philanthropic services like health, education, and service. 

Religious trusts are overlooked by a board of trustees or directors. They often belong to a religious community. However, this changes in the case of charitable trusts. Religious trusts rely on the members of their religious community for donations. Charity trusts garner funds from various resources. They can be public foundations and private foundations as well. The funds that are garnered by the religious trusts are utilized in the delivery of religious services. Charitable trusts use their funds to support the society at large. These include support programs and monetary help. 

Religious trusts may often demand a trustee of the same religion. The organization is generally managed and run by people belonging to the institution’s religion. The beneficiary may, too, belong to a particular religion. Charitable trusts that are open to all. They can be run by anyone and benefit anyone. 

The religious motives of a religious trust differentiate it from any charitable trust. 

Benefits of Religious Trusts: 

Registering your religious trust can offer a plethora of benefits. Some of them are: 

Donations: 

Religious trusts do not have to pay any tax on the donations that they receive. Religious trusts get both Corpus donations and voluntary donations. Corpus donations are those funds and assets that are donated with specific directions of use. The directions are provided by the donor to the donee as an instruction to utilize the fund. 

When funds are not treated as corpus of the trust, they are known as voluntary funds. These funds are utilized for any purpose that the trust feels right. Receipt of these funds does not attract any tax to the religious trust under the Income Tax Act.

Tax Exemption and Deduction: 

Religious trusts can avail the benefits of various tax exemptions. Expenditure on various causes like religious promotion can exempt trusts under sections 11 and 12 of the Income Tax Act. The deduction can be claimed under section 80G of the Act. 

What is a Religious Trust Deed? 

Religious trusts are created by entering into a trust deed. A trust deed is entered by the settler and the trustee. The settler has a religious purpose in his mind for which he is forming a trust. The trustees manage the trust and decide how to utilize the funds. The settler is responsible for appointing a trustee who can efficiently manage the workings of the trust. You can get a religious trust deed format pdf easily on Google, or, you can opt for Lawgical Adda to get the best services at affordable prices. 

FAQs: 

How can I create a religious trust in India? 

You can set up a religious trust in India by obtaining a certificate of registration from the Income Tax authorities. You can register your trust with the relevant authorities of the center or state with the help of the obtained certificate. 

Which Act is a religious trust registered under?

Religious trusts were earlier registered under section 12AA of the Income Tax Act. However, the religious trusts amendment brought changes in this registration process. Trusts now have to register under section 12 AB of the Income Tax Act. 

Is Income from religious trust taxable? 

Religious trusts get both Corpus donations and voluntary donations. Receipt of these funds does not attract any tax to the religious trust under the Income Tax Act. The Income Tax Act also provides various exemptions to religious trusts. Expenditure on various causes like religious promotion can exempt trusts under sections 11 and 12 of the Income Tax Act. The deduction can be claimed under section 80G of the Act.