Trusts for Transitioning Assets to Next Generation in India
Trust structures offer asset protection and beneficial governance mechanisms to Indian families with Indian residents and nonresidents members. However, foreign trusts should be mindful of their tax residence in India where such trusts are wholly or partially managed by Indian residents in India. . Our whitepaper, Interaction of Indian and U.S. Tax Laws, covers the taxation of Indian family assets and businesses held through Indian and foreign trust structures.
Under Indian laws, a trust is an unincorporated entity and may be public or private in its form. The various aspects in relation to Indian and foreign trusts and tax implications in Indiaare covered in our whitepaper, Interaction of Indian and U.S. Tax Laws.
To summarize, a public trust is a trust that has been registered under the Indian Trust Act, 1882, and is typically set up to fulfill a charitable purpose. Subject to certain conditions, a public trust that is registered under Indian tax law is exempt from Indian tax. A private trust is a trust that has not be registered under the Indian Trust Act, 1882. Instead, the trust’s deed may be registered in the state where the trust is created. This trust deed lays out the details of the private trust’s form, the settlor, the trustee, and the beneficiaries; it also lays out the settlor’s duties to perform acts on behalf of the trust.