TRUST vs SECTION 8 COMPANY

TRUST
In India there are two kinds of trusts one is public and the other is private trusts are governed by the Indian trusts Act, 1882. Further, the public trust can be categorized as the charitable and religious trusts.

 Public Trust in India- They are the trusts that are designed to benefit the particular class or the public at large. In most of the cases public trust are created for the purpose of for charitable, educational,
religious or scientific purposes. The activities of the trust are regulated by the state government as there is no Central Act applicable for Public trusts. It is a popular concept in India as it is easy to register and manage them.

 Private Trust in India- When a trust is constituted for the benefit of the one or more individuals who are ascertained it is said to be said to be the private trust in India. These trusts are usually governed by the Indian Trusts Act, 1882.

The main instrument of any public charitable trust is the trust deed. The trust deed should be signed by both the settlor/s and trustee/s in the presence of two witnesses.

The trust deed should be executed on non-judicial stamp paper, the value of which would depend on the valuation of the trust property.

Benefits to register Trust in India:
1. Asset Protection: Trusts can be one of the most effective ways of protecting assets. In simple terms, assets transferred to a trust no longer form part of the Settlor’s property, so the trust assets cannot be seized if a Settlor gets into financial difficulties

2. Tax Planning: Assets transferred into trust are no longer considered as belonging to the Settlor, so the income and capital gains generated by those assets are taxed according to the rules governing the legal owner – the Trustee.

3. Preserving Family Assets: Preserving the family assets, or increasing them, is often a motive for setting up a trust.

4. Gaining Flexibility: The best-laid plans can rapidly become obsolete but a Discretionary Trust can provide a system of management of property that is capable of adapting as circumstances demand.

SECTION 8 COMPANY
A company registered under section 8 of the Indian Companies Act, 2013,it is established ‘for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object’, provided the profits, if any, or other income is applied for
promoting only the objectives of the company and no dividend is paid to its members.

Trustees
A section-8 Company needs a minimum of three trustees; there is no upper limit to the number of trustees. The Board of Management is in the form of a Board of directors or managing committee and should preferably be Indian nationals.

Benefits to incorporate a Section 8 Company
1. Tax benefits: Section 8 Company is a non-profit organization that is why they are exempted from some provisions of the income tax. They are also given numerous other deductions and other tax benefits. They avail benefits under section 80G of the Income Tax Act, 1961. They also are required to pay less stamp duty as compared to other organizations.

2. Minimized Share Capital: Unlike the other limited companies like private, public, or one person, the companies registered under section 8 doesn’t require much share capital. They can be directly funded from subscriptions or donations made to them.

3. Use of title: Unlike the other companies, who have to use the title as ‘limited company’, section 8 of the IT Act exempts them for the use of any suffix or title, they can still exercise their functions without informing the public of their limited liability status.

4. Ease at Transfer of title/ownership: Unlike the limited liability companies who are not allowed to transfer the title or ownership, but as per section 8 of the Income Tax Act, 1961 allows the transfer of title or ownership of both movable and immovable interest with no hurdles or restrictions of any sort.

5. Can be Publicised on an National Field

6. Can avail Loan easily from Bank

For any query/information on Trust or Section 8 Company please write to us on mail@maksimconsultants.com