Trust Deed Clauses: The Checklist Before You Sign
Before you sign a trust deed, check that it names the settlor and trustees, states the objects and beneficiaries, describes the trust property, and sets out how trustees are appointed and removed, how accounts and the bank are run, and how the deed is amended. For a charitable trust, it must also be irrevocable, bar any benefit to the settlor, and say where assets go on dissolution.
- The deed is the trust's rulebook. Changing it later is slow and, for a public trust, may need an outside authority's permission.
- The income-tax portal does not accept a provisional registration application from a revocable trust.
- Three clauses carry most of the tax weight: irrevocability, no benefit to the settlor, and dissolution.
- For a private family trust, the clause that fixes each beneficiary's share decides the tax rate.
- Stamp duty on the deed is a state matter. No single figure applies across India.
In this guide
Why read every clause?
Because a trust has no owner who can fix things informally. The settlor, the person who gives the property, steps back once the deed is signed. The trustees can do only what the deed allows. If the deed is silent on replacing a trustee or closing the trust, nobody inside the trust has the power to decide it. If you have not yet chosen between a private and a public trust, read types of trust in India first, because the clauses differ.
The checklist: clause, what to check, why it matters
| Clause | What to check | Why it matters |
|---|---|---|
| Name and office | The exact name and a full address | The PAN, the bank account and the registrations copy it |
| Settlor | Name, address, PAN, and a clear statement that the property is handed over | A trust needs a transfer of property, not only an intention |
| Trustees: appointment and removal | First trustees by name, minimum and maximum number, term, who appoints a replacement, grounds for removal, what happens on death or resignation | A deed silent here leaves the trust stuck when a trustee leaves |
| Objects | Specific purposes in plain words. For a charitable trust, purposes that are charitable and open to the public | Trustees can spend only on the objects, and the tax officer reads them line by line |
| Beneficiaries | Private trust: named people and their shares. Public trust: the class of public served | Fixed shares and unfixed shares are taxed differently in a private trust |
| Trust property | The starting sum or asset, and that later donations form part of the trust fund | Certainty of property is a legal requirement for a valid trust |
| Powers and duties | Power to invest, hold property, hire staff, accept donations. Duty to act only for the objects | Banks and donors ask what the trustees are allowed to do |
| Accounts and audit | Books kept yearly, the accounting year, audit by a chartered accountant | Tax exemption depends on accounts that can be checked |
| Bank operation | Who signs, singly or jointly | The bank follows this clause to the letter |
| Amendment | Who can amend, by what majority, and that no change can defeat the objects | Without it, even a small correction may need a court |
| Irrevocability | A plain statement that the trust is irrevocable | A revocable trust gets no tax registration, and its income is taxed in the settlor's hands |
| No benefit to the settlor | That no part of the income or property goes to the settlor, the trustees or their relatives | A benefit to these people puts a charitable trust's exemption at risk |
| Dissolution | That on closure the remaining assets go to another trust with similar objects and never back to the settlor or trustees | Shows the property is given away for good |
Which clauses does the income-tax registration look at?
A charitable or religious trust applies for registration so that its income is exempt, and for approval so that donors get a deduction. Since 1 April 2026 these are applications under sections 332 and 354 of the Income-tax Act, 2025, made in Form 104 before activities start and Form 105 after. A self-certified copy of the deed goes with the application, so the officer reads what you signed.
| Clause | What the tax side looks for | How sure we are |
|---|---|---|
| Irrevocability | The department's user manual for Form 104 says you cannot file the application if the trust is revocable, and cites section 332(2)(b) | Read on the official page |
| Objects | Charitable or religious purposes, with a note on proposed activities | Official page for the documents. The test of each object is the officer's judgment |
| No benefit to settlor, trustees and relatives | Under the 1961 Act this was the section 13 rule. The 2025 Act is reported to carry it forward | We could not open the new section, so treat the number as unconfirmed |
| Dissolution | Officers commonly ask for it. Several High Courts have held it is not essential for registration | Practice and reported rulings, not a rule we read |
One caution from this year. Under the older Form 10AB, Item 6 asked whether the deed has an irrevocability clause, and a Bombay professional body wrote in January 2026 that the form could not be completed with a "No". Public charitable trusts are irrevocable in law even when the deed does not say so, and courts have said as much. But arguing that takes months. Writing the clause takes one line.
A worked example: one clause, Rs 32,760 a year
Assumptions: the 1961 Act rules as they stood for FY 2025-26, a settlor in the 30% slab, surcharge ignored. A father settles Rs 15 lakh in a fixed deposit at 7% for his daughter. The trust earns Rs 1,05,000 a year.
- The deed lets him take the money back. The trust is revocable. The Rs 1,05,000 is taxed as his income: 30% is Rs 31,500, plus 4% cess of Rs 1,260. Total Rs 32,760 every year.
- The deed is irrevocable and the daughter's share is fixed. The income is taxed as hers. If she is an adult with no other income, Rs 1,05,000 is under the basic exemption and the tax is nil.
The price of the saving is real: he cannot take the Rs 15 lakh back. Decide that before the drafting starts, not after.
The mistakes people usually make
- Objects that try to cover everything. A list of forty purposes, some of them commercial, invites questions. Write what the trust will do in its first five years.
- A founder clause that pays the founder. A salary, rent for the founder's building, or free use of trust assets by relatives is the quickest way to lose the exemption.
- No removal or succession clause. Trustees fall out, move abroad or die. The deed should say who decides.
- Leaving shares open in a family trust. Letting trustees decide the split each year can push the income to the highest tax rate.
- Treating the deed as the last step. Stamp duty, registration with the sub-registrar and, in some states, the Charity Commissioner follow. See how to register a trust.
Can you draft it yourself? You can write the facts yourself: the names, the purpose, the property. The wording of the tax clauses and the trustee clauses is where a professional earns the fee, because a mistake there surfaces years later. What to do next: go down the checklist table with your draft and mark each row "present", "missing" or "unclear".
Sources
How AprilTax can help
A Tax Expert at AprilTax drafts your trust deed for Rs 1,499. You fill in one online form with the proposed trust name, the settlor, the trustees, the purpose and the registered address. The fee covers drafting the deed only. Stamp duty, registration and the PAN are separate. Start at trust deed drafting.
Frequently asked questions
What are the essential clauses of a trust deed?
Does a trust deed need an irrevocability clause for income-tax registration?
What should the dissolution clause say?
Can the settlor also be a trustee?
Can a trust deed be amended after signing?
How many trustees should a trust deed name?
Why does a family trust deed need fixed shares?
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