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TRUST

A trust can be a public trust or a private one. When the purpose of the trust is to benefit an individual or a group of individuals or his or their descendants for any legal person and who is capable of holding property, it is a private trust. When the purpose of the trust is to the benefit the public or any section of the public, it is public trust.

Advantages

  • There is a separate legal entity
  • The trust is managed by a group of trustees who necessarily do not need to be the beneficiary. Hence it can be set up for the benefit of minor children, person with mental disability etc.
  • Ownership of the trust does not vest with anyone. The trustees only manage the trust assets.
  • Trustees can be changed relatively easily and hence change on management is easy.

Disadvantages

  • The author (creator) of the trust losses the ownership of the trust assets. The same will be owned by the trust and proceeds will be used as stipulated in the trust document.
  • Non – charitable trusts are taxed at maximum marginal rate and have no tax benefits.
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  • A registered trust document is a must for formation of a trust. LeaseCFO will assist in authoring a trust and getting the same registered.
  • A PAN card should be take for taxation purposes
  • Account to be maintained and yearly returns to be file.
  • For Charitable trusts, 12A registration under income tax act to be obtained.

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