Practical Tips on Drafting of Trust Deed of A ‘Charitable & Religious Trust’


It is particularly necessary for the person drafting the deed to bear in mind the three certainties of a valid trust which are —

(i)      certainty of declaration, i.e. imperative nature,

(ii)     certainty of subject matter, i.e. property in which it acts,

(iii)    certainty of object or beneficiary.

Any one drafting the deed of a public charitable trust has to bear in his mind several enactments, particularly, the Indian Trusts Act, 1882, any local / state enactment relating to trusts, like the Bombay Public Trusts Act, 1950 for the State of Maharashtra and the Income Tax Act, 1961. He should also keep in mind the ratios of the various judicial pronouncements dealing with the scope of “charitable purpose” and deciding whether a particular purpose is charitable, interpretation of the particular objects clauses of the trust deed to decide whether the same is charitable or not.

Here are a few tips:

  1. Express words for creation of trust are needed. Intention to create a trust should be clearly spelt out. In order to find out whether the relevant clauses ofa trust deed create a public charitable trust or not one has to go by the express words employed by the trust deed. For finding out the real intention of the settlor, the words used in the deed would be the real vehicle of thought of the settlor expressing his intention in cold print. (CITy. Kamla Town Trust  (1996) 217 ITR 699 (SC).

  2. There should be sufficient clarity as to the working of the trust and detailed provisions should be made therefor so that there is no ambiguity.

  3. For construction of deed it must be read as a whole. It is a well settled rule of interpretation that the intention of the settlor must be gathered from the settlement as a whole and no particular clause should be construed in isolation for the intention of the author of the settlement. It is to be found not in one part of the settlement or in the other but in the entire deed and that intention can best be gathered by viewing a particular part of the settlement, not detached from its context in the settlement, but in connection with its whole context. (Satya Vijay Pate? Hindu Dharamshala Trust v. CIT (1972) 86 ITR 683 (Guj).

  4. What if several parts of the deed may be held to be invalid? The invalidity of a part of the trust deed does not invalidate the remainder where the valid portion is independent and severable from the invalid portion. (CITy. HamdardDawakhana (1960) 39 ITR 144 (Punj). Similarly, the invalidity of the deed of gift in respect of one item cannot affect its validity in respect of another, according to CIT v. Juggi?al Kama?apat (1967) 63 ITR 292 (SC).

  5.  For correct interpretation of the deed, substance of the matter, rather than precise language is relevant. If, upon scrutiny of all the relevant provisions of the indenture of trust, it appears that a valid trust as contemplated by the Indian Trusts Act was created, then instead of giving too much importance to want of precise language, the substance of the matter should be looked at. (CIT v. Trustees of Dr. Divekar Charity Trust (1977) 110 ITR 227 (Born).

  6. Binding nature of the Trust Deed. The terms of the trust deed are binding on trustees and any departure by him from them is breach of the trust which the court is competent to restrain. [All India Spinners ‘Association v. CIT (1944) 12 ITR 482 (PC), CITy. Lad Parishad Karyalaya(1974) 94 ITR 359 (Born), CED v. KA. Kader & Ors. (1974)96 ITR 289 (Mad), CITy. Trustees of Sreeram Surajmal Charity Trust (1971) 79 ITR 649 (Cal) and Shervani Charitable Trust v. CIT(1968) 69 ITR 750 (All)].

  7. Suggestion to provide proper safeguard. With a view to providing proper safeguard, it is suggested that the instrument of trust or institution created or established should contain, inter alia, the following clauses —

1.       “ Nothing contained in this deed shall be deemed to authorize the trustees to do any act which may in any way be construed as violative or contrary to the provisions of sections 2(15), 10(23 B), l0(23C), 11, 12, 12A, 12AA, 13 and/or 800 ofthe Income Tax Act, 1961 and/or statutory modifications thereof and all activities of the trust shall be carried out with a view to benefiting the public at large, without any profit motive and in accordance with the provisions of the Income Tax Act or any statutory modification thereof.

2.       The trust is hereby expressly declared to be a public charitable trust and all the provisions of this deed are to be construed accordingly. “


What is ‘Charitable Purpose’ for Income Tax Purposes ?  [Sec. 2(15)]
Laws Applicable to Charitable Institutions/Trusts
Provisions Relating to Anonymous Donations & Gifts [ Sec. 11 5BBC ]
Formation Of A ‘Charitable & Religious Trust’
TRUST DEED of A ‘Charitable & Religious Trust’
Practical Tips on Drafting of Trust Deed of A ‘Charitable & Religious Trust’
Need for Registration of A “Charitable & Religious Trust”
Types of Registrations of A “Charitable & Religious Trust”
Procedure for Registration of Trust under the Indian Trusts Act, 1882
Registration of Trust under Sections 11 & 12 of the Income Tax Act, 1961
Cancellation of Registration of A “Charitable & Religious Trust”
Belated Filing of Application for Registration of A “Charitable & Religious Trust”
Practical Problem on Registration of a ‘Trust’ U/s. 12A
Creation of a Valid Charitable or Religious Trust
Income Tax Provisions For A “Charitable & Religious Trust”
‘Exemption’ Provisions For A “Charitable & Religious Trust”
Approval Of “Trust”  U/S 80G Of The Income Tax  Act. To Give Some Benefits To Its Donors.
Deduction To A Trust U/s 35AC
Power Of The ‘Trustees’ Of ‘Trust’
[Section 2(15)] : Exemption of Income of a Charitable & Religious Trust
[Section 11(2)] :      Accumulation or Setting Apart of the Trust Income for a Specific Purpose
[Section 11(4)] : Income from Business Undertaking of Property held under ‘Charitable Trust’ in Excess of the Income Shown in the Account
[Section 11(5)] : Forms or Modes of Money Accumulated or Set Apart of Trust Income Invested or Deposited
Trust Partly for Charitable or Religious Purpose and Partly for Other Purposes
[Section 11(1A)] : Capitai Gains Of The Trust For Charitable Purposes
[Section 12] : Income Of Religious Trusts Or Institutions From Voluntary Contributions
[Section 12AA] : Procedure For Registration Of A Trust Or Institution
[Section 13] : Income Of Charitable Or Religious Trust Does Not Qualify for Exemption u/s 11 or 12
Electoral Trusts Scheme, 2013 (Vide Not.No. SO. 309(E), dated 31.01.2013)
Functions Of Electoral Trusts - ET [Rule 17CA] [Vide Not.No. SO. 308(E), dated 31.01.20131.]
Important Points To Be Consider While Filing The Return Of A Charitable Trust Or Religious Institution:
Private Charitable Or Religious Trusts  ( Sections 161, 164 & 166 )
[Section 164(1)]: Where Shares Of The Beneficiaries Of a Private Discretionary Trust Are Indeterminate Or Unknown :
Property held under Trust Partly For Religious Purposes And Partly For Other Purposes :
ORAL TRUST [Sections 160(1)(v) and 164A ]
[Section. 167B] : Association Of Persons (AOP) And Body Of Individuals (BOI)
Tax Rates applied on Charitable or Religious Trusts
[Section-67A] :  Method Of Computing A Members Share In Income Of Association Of Persons (AOP) Or Body Of Individuals (BOI)
Provisions to Securitisation Trusts [As introduced by the Finance Act, 2013]
Definition of ‘Securitization Trusts’ as per SARFAESI Act.
Definition of ‘Securitization Trusts’ as per the SEBI Regulations
Definition of ‘Securitization Trusts’ as per the RBI Guidelines
Provisions relating to Tax on Distributed Income by Securitisation Trust
BUSINESS TRUSTS – Meaning & Provisions
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