Latest news with #IndianTrustsAct
Mint
4 days ago
- Business
- Mint
A matter of trust: Private trusts are not a tax-saving hack. When should you set one up?
A private trust sounds like a billionaire's trick to stash wealth in offshore havens. But it's actually a clean, underrated structure for Indian families juggling succession, asset protection, or care for vulnerable loved ones. Think of it as a rulebook for your wealth, not a secret vault. Trusts often beat joint ownership or HUFs (Hindu undivided families) for clarity. But they're not for everyone and definitely not a tax-planning tool. So, when should you set one up? A private trust is a legal arrangement governed by the Indian Trusts Act, 1882. In simple terms, you (the settlor) hand over assets to someone you trust (the trustee) to manage for someone else (the beneficiary). You can wear all three hats – settlor, trustee and beneficiary. The trust deed is the operating manual, spelling out who gets what, when and how. There are two main types of trusts: Specific trust : Beneficiaries and their shares are fixed, like a family recipe. : Beneficiaries and their shares are fixed, like a family recipe. Discretionary trust: The trustee decides how and when to dish out the assets, like a chef improvising in the kitchen. Not every family needs a trust, but it can solve problems that aren't just about money. These pertain to: Minor children or dependent parents If you're gone tomorrow, who manages your assets for them? A trust lets you decide who handles the money, how it's used, and when the beneficiaries get it, avoiding probate or succession fights. Family member with special needs Trusts secure long-term funds for those who can't manage finances, preserving dignity and rights. They can also be structured for slab-rate taxation. Business or marital disputes Discretionary trusts shield assets from creditors, family feuds, or ex-spouses. Not bulletproof, but stronger than joint holding or nominees. HUF feels too rigid HUFs have rigid succession rules and legal baggage. Trusts offer flexibility as you control who manages and benefits, without unintended rights. Smooth succession for real estate or NRO/foreign assets Trusts bypass probate (for wills) or succession certificates (no will), which can take months. For NRIs, they ease cross-border transfers. Example: Imagine a business owner with two minor kids and a family home in Pune. By setting up a specific trust, they appoint their sister as trustee to manage the property and business income, ensuring the kids get funds for education until age 25, while shielding assets from business creditors. Trusts are not a tax hack. In aspecific trust, income from the corpus or assets in the trust is taxed in the beneficiaries' hands, as if they earned it directly (e.g., ₹ 3 lakh split among three beneficiaries). In adiscretionary trust, where the trustee decides distributions, income is taxed at the maximum marginal rate (42.744% including surcharge and cess) if beneficiaries or shares are indeterminate, per Section 164 (1). Consult a tax expert to structure it right. Trusts with taxable income must file returns, maintain books, and comply with PAN, TDS and investment rules. Transferring real estate may attract stamp duty, varying by state. The trust deed may also need registration under the Registration Act, 1908, in case of immovable property. A trust is a structure for control, continuity and avoiding chaos—not a tax loophole. A poorly drafted trust can cause more headaches than it solves. You wantcontrol and clarity after you're gone You havefamily-specific needs like special care, blended heirs or conflict-prone succession You're holdingsubstantial assets across entities and want a single long-term vehicle to manage them Don't use one if: You're just trying to save tax Your family setup is simple and straightforward You won't invest in good legal drafting and compliance Most families keep assets in their own name because, well, that's just how dad did it, and grandpa before him. But inheritance today isn't a matter of trust, it's a matter ofTrust (with a capital T). A private trust is not some billionaire's loophole. It's a well-documented, regulator-approved way to make sure your wealth reaches the right (intended) people at the right time, without the wrong surprises. Work with a professional advisor to draft a robust trust deed and stay compliant, avoiding costly fumbles. If you don't want your family to fight over your money, give them a rulebook, not just a balance sheet. CA Vijaykumar Puri, partner at VPRP & Co LLP, Chartered Accountants
Mint
12-06-2025
- Business
- Mint
Cube Highways Trust completes acquisition of 2 highways in J&K from NIIF for ₹4,185 crore
The National Investment and Infrastructure Fund (NIIF) and Cube Highways Trust (Cube InvIT), which are both managed by Cube Highways Fund Advisors Pvt. Ltd, announced on Thursday the successful transfer of two operational annuity road projects from NIIF to Cube InvIT at an enterprise value of ₹ 4,185 crore. The two assets being transferred, Quazigund Expressway Pvt. Ltd (QB) and Athaang Jammu Udhampur Highway Pvt. Ltd (JU), spanning approximately 80km and located in Jammu and Kashmir. QB is one of the longest bi-directional tunnels in India, while JU is an essential link between Jammu and Srinagar. These assets have a residual concession life of over six years and are backed by fixed semi-annual annuity payments from the National Highways Authority of India (NHAI), providing stable and predictable cash flows that are insulated from traffic risks. The total enterprise value (including cash) of the two assets has been reported at ₹ 4,185 crore, subject to all closing adjustments as specified in the share purchase agreement (SPA), Cube Highways Trust said in a statement. "We are pleased to collaborate with NIIF on this important transaction. Today's acquisition will add to the high-quality, pan-India portfolio and enhance the Trust's exposure to fixed-revenue annuity assets that are unaffected by traffic risks and economic cycles. It also showcases Cube InvIT's disciplined capital allocation strategy and prudent use of its balance sheet for acquiring de-risked assets with strong fundamentals. This transaction is expected to be accretive to net distributable cash flows by ₹ 2.3 per unit annually, on average, over the next five years,' Vinay C. Sekar, chief executive officer (CEO) of Cube InvIT, said. Pankaj Vasani, Group chief financial officer (CFO) of Cube InvIT, said, "The strategic addition of these two completed and revenue-generating annuity assets optimally complements our existing portfolio of assets and grows the annuity exposure. Following this transaction, annuity revenue will account for 33% of Cube InvIT's total revenue. With a net debt to AUM ratio of 49% (post transaction) and a AAA-rated credit profile from Crisil, Icra and India Ratings, Cube InvIT remains well-positioned to pursue further value-accretive acquisitions.' Vinod Giri, managing partner, master fund, NIIF, said this transaction reflects NIIF's ability to underwrite complex transactions and acquire large infrastructure assets, de-risk them with a comprehensive plan, improve the credit profile, and create value. "These assets strongly reflect the core competency of Athaang, the wholly owned roads platform of NIIF, in managing high-quality infrastructure assets with operational excellence through best-in-class systems and processes. This track record enables us to deliver strong returns and attract global institutional capital.' Cube Highways Trust is an irrevocable Trust set up under the Indian Trusts Act, 1882 and registered with the Securities Exchange Board of India (Sebi) as an Infrastructure Investment Trust. It is backed by a diversified investor base, including I Squared Capital, a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA), British Columbia Investment Management Corp. and Abu Dhabi's sovereign investor Mubadala Investment Co. Cube Highways Trust is engaged in implementing the public-private partnership model in the country's highways sector to operate and manage highway projects in association with the Union and state governments.
Mint
02-06-2025
- Business
- Mint
India must streamline rules for the institutional trustee industry
India's wealth management ecosystem is undergoing rapid transformation, with institutional trustees playing a pivotal role in safeguarding assets, enabling succession, and ensuring fiduciary compliance. Yet, the regulatory framework governing institutional trustees remains fragmented and outdated, exposing the system to significant risks. As the volume of wealth under institutional trusteeship soars—estimated in the range of tens of thousands of crores—there is a pressing need to establish robust, uniform regulations to protect all stakeholders and foster sustainable industry growth. Also Read: How PPFAS is trying to change wealth management with simple advice Institutional trustee services in the country are primarily governed by two main statutes: (i) The Indian Trusts Act, 1882, which provides the foundation for the creation, administration, and duties of trustees in private trusts; and (ii) SEBI (Debenture Trustee) Regulations, 1993, administered by the markets regulator, specifically governing debenture trustees. Despite these frameworks, there is no comprehensive, unified regulation or certification regime for all institutional trustees, especially those operating outside the debenture and securities space. This regulatory gap exposes the industry to inconsistencies and serious risks. Why institutionalization is the need of the hour Enhanced professional standards and accountability: Institutionalising the industry would introduce mandatory certification, training, and ongoing education, similar to how chartered accountants (CAs) are regulated by the Institute of Chartered Accountants of India (ICAI). CAs must pass rigorous exams, adhere to a code of ethics, and undergo regular peer reviews, ensuring high professional standards and accountability. This structure has led to greater public trust and fewer instances of malpractice in the accounting profession. Improved transparency and investor protection: A regulated institutional trustee industry would require robust disclosure norms, regular audits, and transparent reporting, reducing the risk of fraud, mismanagement, or conflicts of interest. As seen in the CA profession, regulatory oversight deters unethical behaviour and builds investor confidence. Uniformity in practices and reduced legal ambiguity: Currently, the lack of standardization leads to varying practices and legal uncertainties, particularly in private trusts and family offices. Regulation would harmonize procedures, documentation, and dispute resolution mechanisms, reducing litigation and confusion. Better risk management and systemic stability: With thousands of crores of wealth under trusteeship, unregulated practices pose systemic risks to the wealth management and financial services sectors. Regulation would enforce risk management protocols, capital adequacy norms, and contingency planning, safeguarding both beneficiaries and the broader economy. Also Read: Can this mid-cap company take the lead in the exploding $1.2 trillion wealth management business? Facilitated market growth and global competitiveness: A regulated and institutionalized trustee industry would attract more domestic and international capital, as investors prefer jurisdictions with clear rules and protections. This would enable Indian trustees to compete globally and foster innovation in trust structures and estate planning. International precedents: Lessons from abroad UK: The UK's trust industry is regulated by the Financial Conduct Authority (FCA), which mandates licensing, compliance, and anti-money laundering checks. This has resulted in a transparent, reliable, and globally respected trustee sector. Singapore: The Monetary Authority of Singapore (MAS) regulates trust companies, ensuring high standards of governance and investor protection. This has made Singapore a preferred hub for wealth management and family offices. US: Trust companies are state-licensed and subject to regular audits and capital requirements, ensuring safety and soundness for beneficiaries. In all these jurisdictions, regulation and oversight has benefited all stakeholders—trustees, beneficiaries, and the financial system—by reducing fraud, enhancing professionalism, and boosting investor confidence Risks of delayed action in India If India does not move swiftly to institutionalize and regulate its institutional trustee industry, the following risks loom large: Increased incidents of fraud and mismanagement: Without oversight, unscrupulous operators can exploit loopholes, leading to financial losses for beneficiaries and reputational damage to the industry. Legal and operational risks: Ambiguities in trustee duties and the lack of oversight can result in costly legal disputes, delays, and reputational damage. Loss of investor confidence: High-profile scandals or disputes could deter both domestic and foreign investors from using Indian trustee services. Regulatory arbitrage: Inconsistent rules could lead to regulatory arbitrage, where entities exploit gaps between different legal frameworks, undermining the integrity of the financial system. Systemic risk: The sheer quantum of wealth under trusteeship—estimated to be in the range of several lakh crores—means that failures could have ripple effects across the financial sector. Competitive disadvantage internationally: India may lose out on attracting global capital and trust business if it does not adopt internationally recognised governance standards. Also Read: Mastering wealth management: The role of psychology in decision making and financial success The institutional trustee industry in India stands at a crossroads. While there are a handful of institutional trustees currently operating per global best practices, several are not. To protect the vast wealth under their stewardship and to foster a robust, transparent, and globally competitive wealth management ecosystem, there is an urgent need to institutionalize and regulate trusteeship. Establishing a certification or regulatory body would professionalize the sector, protect stakeholders, and unlock long-term benefits for trustees, mirroring successful international models and established Indian professional bodies. Tanmay Patnaik is partner-private client practice at Trilegal.
