Registered Trust (Public Trust):
Primarily established for public welfare, charitable, religious, or educational purposes. They are often involved in activities like running schools, hospitals, providing disaster relief, or promoting social causes.
Open to the public or a defined segment of the public.
Operates with the primary goal of benefiting society.
Family Trust (Private Trust):
Established to manage and protect the assets of a family and ensure their smooth succession.
Primarily benefits the members of a specific family.
Can also be used for tax planning, asset protection, and wealth distribution within the family.
2. Beneficiaries:
Registered Trust: The beneficiaries are a broad section of the public or a defined group (e.g., students, patients, etc.).
Family Trust: The beneficiaries are specific members of the family, such as parents, children, and grandchildren.
3. Registration and Regulations:
Registered Trust (Public Trust):
Requires registration with the relevant State Charity Commissioner or Registrar of Trusts under the applicable state-specific Public Trust Act (e.g., Bombay Public Trusts Act, 1950).
Subject to strict regulatory oversight to ensure compliance with its stated objectives. This includes filing annual returns, maintaining proper accounts, and adherence to rules on investment and application of funds.
Audits are compulsory.
Governed by the Indian Trusts Act, 1882 (for general principles) and the respective State Public Trust Acts.
Family Trust (Private Trust):
Registration is optional, but generally recommended for greater legal certainty and protection. It would be registered under the Indian Trusts Act, 1882.
Subject to less stringent regulatory oversight compared to public trusts.
However, they are still governed by the Indian Trusts Act, 1882, and are subject to tax laws.
Often designed with more flexibility for managing family assets.
4. Tax Implications:
Registered Trust:
Can claim tax exemptions under Section 11 and 12 of the Income Tax Act, 1961 for income applied to charitable purposes, provided they comply with the conditions outlined in the Act.
Donations to registered trusts are also eligible for deduction under Section 80G of the Income Tax Act.
Family Trust:
Tax implications depend on the trust structure and the nature of the assets.
Income can be taxed in the hands of the trustee or the beneficiaries, depending on the trust deed's provisions.
Tax planning is a key objective, but compliance with tax laws is mandatory.
Capital Gains are applicable, if there is any sale of the asset of the trust
5. Management and Administration:
Registered Trust:
Governed by a Board of Trustees or a governing body, which is responsible for managing the trust's affairs.
They are accountable to the beneficiaries and the regulatory authorities.
Family Trust:
Managed by trustees appointed by the family.
Management can be more private and flexible, based on the family's wishes and the trust deed.
6. Flexibility and Control:
Registered Trust: Less flexible, with restrictions on how funds can be used, based on its stated objectives.
Family Trust: Offers greater flexibility in asset management and distribution, allowing for specific arrangements to suit the family's needs.
7. Disclosure:
Registered Trust: Requires more public disclosure, including annual reports and financial statements.
Family Trust: Disclosure is generally limited to the family members involved.
Here's a Table summarizing the key differences:
| Purpose | Public welfare, charitable, religious, etc. | Managing family assets, succession planning |
| Beneficiaries | Public or defined group | Family members |
| Registration | Mandatory (with State Charity Commissioner) | Optional (but generally recommended) |
| Regulations | More stringent | Less stringent |
| Tax Benefits | Tax exemptions under Sec. 11 and 12; 80G | Tax planning, but tax laws apply |
| Oversight | Significant | Relatively less |
| Disclosure | More public | Private, limited to family members |
| Flexibility | Less flexible | More flexible |
| Focus | Serving the public | Protecting and managing family wealth |
In conclusion:
Choose a Registered Trust if your primary goal is to benefit the public or undertake charitable activities.
Choose a Family Trust if your main objective is to manage and protect family assets, plan for succession, and manage wealth distribution within the family.
No comments:
Post a Comment