INDIA Law and Practice Contributed by: Rishabh Shroff, Kunal Savani and Chirag Shah, Cyril Amarchand Mangaldas
Trusts A trust is created when the author or the settlor of the trust sets apart some property for a charitable purpose so that the income can be devoted to fulfill - ing the said charitable purpose. Various states have enacted separate legislation to govern the adminis - tration of charitable trusts, such as the Maharashtra Public Trusts Act, 1950. Where no such separate state legislation exists, a public trust can be set up by reg - istration of the trust deed with the registrar under the Registration Act, 1908. The advantage of forming a trust as a charitable organisation is that the control of the organisation can lie with a few persons who are chosen as trustees and are not elected. These trustees can be nominated for any period extending up to their lifetime. However, the disadvantage is that neither the objects of the trust nor the powers of the trustees can be changed by the trustees themselves, even where the circumstances warrant such changes, without the approval of certain authorities such as the Office of the Charity Commissioner or the court of the compe - tent jurisdiction, as the case may be. Societies A society is essentially an association of seven or more persons united together to achieve an identified common purpose (under the relevant regulations). For a society to be considered as a charitable organisa - tion, the object of the society must conform to the definition of “charitable purpose” under the ITA. While the Societies Registration Act, 1860 is the cen - tral legislation governing societies, various states have enacted independent legislation or amended the central legislation to ensure the proper function - ing of societies. Thus, a society can be registered in any district of India with the Registrar of Societies in that particular area. Forming a society as a charitable organisation may be more suitable where there are numerous donors or where the control and manage - ment is sought to be more broad-based with greater participation. The advantage of a society as a charitable organisa - tion is that the objects and the powers can be easily
The ITA provides that a charitable purpose includes, inter alia: • relief of the poor; • education; • medical relief; and • the preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility. There are many ways in which a person can undertake charity in India. All of the structures have more or less similar incentives and exemptions. The definition and governing law regarding the charities varies depend - ing on type of structure set up for charitable purposes. Income of charitable trusts and institutions, registered under the ITA, is exempt from tax subject to certain conditions such as: • application of income for charitable purposes in India; • filing of timely income-tax returns; and • adhering with conditions set forth in the certificate of registration, etc. Only trusts or institutions incorporated in India are eli - gible for the said exemption. Further, income of such trust or institution has to be applied wholly for chari - table or religious purposes within India. In order to encourage charitable giving, the donors making donations to charitable trusts or institutions registered under the ITA are allowed deductions for the amount of donations made by them, thereby reducing their taxable income. The deduction can be claimed up to a maximum of 50% or 100% of the donated amount, depending on the institution or fund to which the donation has been made. 10.2 Common Charitable Structures A charitable organisation is usually formed by way of a trust, a society under the Societies Registration Act, 1860 or a company limited by guarantee under Sec - tion 8 of the Companies Act, 2013. The advantages and disadvantages of the forms are as follows.
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