Property Plus
Coimbatore
LEGAL CHAT
Ownership through private trusts
N.C.S. RAGHAVAN ARIVIND RAGHAVAN
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A trust can be created and declared on an immovable property of a value of Rs.100 or more
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Matters relating to instruments of trust, their execution, registration, stamp duty and registration fee are discussed below, followed by a discussion on tax incidence on private trusts under the provisions of the Income Tax Act, 1961.
A private trust under the provisions of the Indian Trusts Act, 1882, can belong to any one of the following categories:
A trust can be created orally in respect of movable property or money declared as trust property. Such trusts are termed as “oral trusts.”
However, a trust can be created and declared on an immovable property of a value of Rs. 100 or more only through a written instrument of trust, executed and registered under the Indian Registration Act, 1908. Stamp duty and registration fee on such instruments of trust are covered by the provisions of the Karnataka Stamp Act, 1957, read with the Karnataka Stamp Rules, 1958.
Trust property
Where the author of the trust owning an immovable property (of a value of Rs.100 or more) declares the same as trust property through an instrument duly executed and registered and the author of the trust himself is made the sole trustee, the stamp duty payable on the instrument of trust will be a nominal sum of Rs.500 only (vide Article No.54{ii} in the Schedule to the Karnataka Stamp Act, 1957). However, the registration fee payable on such an instrument will be one per cent on the fair market value of the property (guideline value).
This is a substantial concession under the law in respect of stamp duty and it can be made use of by making the author of the trust himself as the sole trustee.
In such a case, in respect of day-to-day management of the administration and other affairs of the trust, the sole trustee can appoint administrative executives as employees to work under him.
However, when there are trustees other than the author of the trust, the stamp duty payable on the instrument of trust will be same as that levied on conveyance i.e., 7.5 per cent (including all surcharges) on the fair market value of the property (guideline value) and the registration fee payable on the same will be one pr cent of the fair market value of the property (guideline value).
(Information on trusts will be continued next week)
(N.C.S. Raghavan is a chartered accountant and Arvind Raghavan, an advocate)
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