The Indian Trusts Act, 1882

ORIGIN OF THE CONCEPT OF “TRUSTS”

The concept of “TRUSTS” has its origin from the Latin word “fideicommissum”, “fide”
refers to loyalty, faith, trust and “commissum” refers to commission. It owes its origin to the
Roman Law. At that time, “fideicommissum” in Roman Law was applicable to the property or
properties of a deceased person which needs to be governed by will. So a person here,
bestows the obligation of his property to another person (most probably his heir), contingent
to the death of the transferor.

This developed into modern day concept in England and later on in the United States of
America. A separate legislation known as “English Trust Law” came into being due to the
development in the “concept of equity”.

The concept of trusts in India was adopted from the English Law. In India, Private Trusts are
administered under the Indian Trusts Act of 1882.1

THE INDIAN TRUSTS ACT, 1882

The Indian Trusts Act administers the rules and regulations of “private trusts” and “trustees”.
A “TRUST” is basically a responsibility or duty entrusted to a person called “TRUSTEE” for
the benefit of another person, known as the “BENEFICIARY” for whom the TRUST is
created.

1. A person who bestows his assurance on another person is known as the “Beneficiary”.
2. A person to whom such assurance is bestowed upon is called the “TRUSTEE”.
3. The property whose obligation is bestowed upon the trustee is called the “Trust
property”.
4. An instrument is required to bestow the assurance of the trust, which has to be signed
by both the parties, I.e., the trustee and the beneficiary.

Important provisions of the Act

a) “DEFINITION OF A TRUST”
Section 3 of the Indian Trusts Act defines the term Trust. In accordance to section 3
of the act, a “TRUST” is understood as a responsibility of a property, known as “trust

1
History of Trusts in India, https://blog.ipleaders.in/overview-private-trust-india/, last visited, on, 30th May,2021
at, 23:49.
 property”, which has been bestowed upon a person, by the owner of the trust property,
known as the beneficiary, for the benefit of the latter.2

b) PURPOSE OF A TRUST
According to section 4 of the Indian Trusts Act,1882, the purpose for which a trust is
instituted should mandatorily follow the law of the land, and shall not be made with a
malafide intention. If the purpose of creation of trust violates the law, then it becomes
void.3

c) CREATION OF TRUST
Section 6 of the Indian Trusts Act,1882, deals with the “creation of trust”. The
“creation _of _trusts” are generally done to fulfill one or more than one of the
following purposes:
1. To take into account the “religious and benevolent notions” of the Beneficiary.
2. An exclusion can be granted to such persons who creates trusts for “religious or
benevolent purposes” under section 10 and section 11 of the Income Tax Act of
1961. Such beneficiaries can claim exclusion from taxes levied on the trust
properties.
3. A trust can also be created for the safety and security of the family members of the
beneficiary.
4. A trust can also be created for the purpose of better management and maintenance
of the property.
5. A trust can be created for any such matter pertaining to “superannuation”,
“gratuity”, “provident-fund” for the purpose of giving benefits to employees or
workers of the beneficiary.4
d) WHO IS AUTHORISED TO CREATE TRUST?
In accordance of Section 7 of the Indian Trusts Act,1882, any person is eligible to
create a trust who is capable of entering into a contract and in cases pertaining to
minors (under the age of 18 years), a trust can be created only with the approval of a
“principal court having original jurisdiction”. Thus, a trust can be created by:
1. “a Hindu Undivided Family” or HUF.
2. a person below the age of 18 years or minor.
2
Section 3, The Indian Trusts Act,1882.
3
Section 4, The Indian Trusts Act,1882.
4
Section 6, The Indian Trusts Act, 1882.
 3. a company having its registered office in India.
4. an “association of persons”
5. any individual who is capable of entering into a contract.5
e) KINDS OF TRUSTS:
a) “Private Trusts”
It is a type of trust, that is created for the welfare of an individual or specific
individuals. Indian Trusts Act, 1882, is enacted to administer the rules and laws
related to the private trusts. A “private trust” is formed either “inter-vivos” or by a
“will”.
b) “Public Trusts”
Institution of a trust, partially or completely, for the welfare or benefit for the
public at large, is known as a “public trust”. For instance, trusts created for
religious or charitable purposes. The Charitable and Religious Act of 1920 deals
with the public trusts.6
f) WHO IS CONSIDERED AS A BENEFICIARY?
Pertaining to section 9 of the Indian Trusts Act,1882, any individual who has a
property can be a beneficiary and he must show his interest to bestow the trust
property upon the trustee, with proper notice being served to the trustee.

g) WHO IS CONSIDERED AS A TRUSTEE?

Any person capable of entering into a contract and can assume his responsibility
as a trustee can be a trustee. A person is not bound to accept the offer of being a
trustee, and even if he is appointed for the same, shall either in writing, or through
words, or conduct, shall particularly make it clear to the property holder, that he is
not willing to assume such role. If he is willing to accept to the role, then also, he
should either in writing, or through words, or conduct, give his consent to the
property holder or the beneficiary.
In case, if the person accepts his role as a trustee, then he is under obligation to
fulfill all the responsibilities towards the trust property that has been agreed upon
at the time of institution of the trust (Section 11).
He can only abandon his position as a trustee with the order of civil court or with
the approval of the beneficiary (Section 46).

5
Section 7, The Indian Trusts Act, 1882
6
Types of Trusts, https://cleartax.in/s/indian-trusts-act, last visited on, May 31,2021, at, 01:04.
 h) DUTIES OR RESPONSIBILITIES OF A TRUSTEE
The duties of a trustee are given under sections 12 to 20 of the act. The following are
the duties or responsibilities of a trustee:
1. Safeguarding the title of the trust property,
2. Refrain from setting up a title in contradiction to the beneficiary
3. Taking due diligence of trust property and taking utmost care as if one does with
his own property.
4. To practice fairness with regard to the trust property.
5. Maintaining of appropriate books of accounts of the trust property.
6. Refrain from wasting the trust property.

i) REGISTRATION OF TRUSTS:
Registration of a trust becomes mandatory, in case it a private trust, which is an
immovable property, instituted by “nontestamentary” instrument. Such registration
becomes compulsory under “The Indian Registration Act, 1908” (Section 17). It is at
the option of the parties whether to register a trust instituted using a will (testamentary
instrument).7

7
Section 17, The Indian Registration Act, 1908