Inside this Article
- Structure of Private Family Trust
- Types of Private Trusts
- Why set up a Private Family Trust
- Income Tax on Private Family Trust
- Registration of Trust
- India Trustee(s) vs Non-Resident Trustee(s)
- India Beneficiaries vs Non-Resident Beneficiaries
- Way Forward
A trust is a fiduciary relationship in which one party, gives another party, the right to hold ownership of the property for the benefit of a third party. Concept of trust is not the new one. The law of Trust first developed in 12th century in England. Trust is most popular mode for passing/ managing asset in most of the countries, with India being no exception.
Trust can be Private or Public Trust. When the trust is created for benefit of specific individuals and not public at large, it is called Private Trust. On other hand, Public trust is created for the benefit for public at large, or a section of Public, especially for religious and charitable purposes.
In India, Private Trust are governed by Indian Trust Act, 1882, which is applicable to entire India except Jammu and Kashmir. As per Indian Trust Act, 1882, trust is defined as follows,
“obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner”
In order to create a trust, following basic requirements needs to be fulfilled, – A person has to transfer a property/assets (“Settlor“)
– In favour of another person, who has right to hold the ownership of the property but (“Trustee“)
– For the benefit of third person, who has right of beneficial enjoyment (“Beneficiary“).
In India, creation of trust is quite common among individuals for managing the assets and as a succession planning tool. This Article seeks to outline and analyze the basic structure and taxation of Private Trusts in India