Settlor is also the Author of the Trust. In more simple words, Settlor is the person who intends to form the Trust. Settlor knows the reason for creation of the Trust, why the Trust is important, what purpose its formation would serve, who would manage the Trust, and most important how it would be managed.
Without the Settlor, Trust formation is impossible.
For those who are not familiar with the concept of Registration of Trust it would be worthwhile to understand that 3 entities are essential whenever a Trust is to be formed:
1. Settlor – also known as the Author of the Trust
Settlor of the Trust is the person who intends to form the Trust for the benefit of Beneficiaries. Legally speaking, any person who is competent to enter into a contract can be a Settlor. A Settlor has the right to appoint the Trustees, atleast the ‘first ones’ during the formation of the Trust. Trustees of the Trust. Trustees to manage the Trust.
A Trust can have more than one Settlor. For instance, 2 people or more can come together with an intention to form a Trust for a Charitable purpose, in which case such individuals can be Settlors as well as Trustees or they can identify people who are willing to carry out the objectives of the Trust as Trustees. Which means a Settlor may or may not be a Trustee in the Trust.
Incidentally, the Indian Trust Act is silent on the number of Settlors a Trust can have.
The Settlor through the Trust Deed makes it obligatory for the Trustees to obey the directions of the Settlor given at the time of creation of the Trust. Once the Trust is settled, the Settlor has no obligation or responsibility towards the Beneficiaries, or the Trustees or the activities of the Trust.
The Settlor cannot be treated as representative assessee under the provisions of Income Tax Act, 1961. Hence the Settlor is not liable to discharge tax liability on the income of the Trust. Yet facts may differ from case to case. And you are therefore advised to seek an informed, considered opinion from a qualified Income Tax Expert before drawing any conclusions on Taxation vis-a-vis the Settlor, the Trust or any other entity connected therewith.