Can a Trustee Take Salary from Trust Fund?

People often ask if a trustee can take salary/compensation from the trust fund. Find out what the relevant laws (Bombay Public Trusts Act 1950 and section 13 of Income Tax Act) have to say about it.

This is one of the most common questions asked by people in India who want to setup a public charitable trust. Running a trust may not be an easy job and it may require a trustee to invest significant amount of time and energy. And some people feel that they should be compensated from the Trust Fund for the work they do. Most lawyers and CAs would straightway tell you that it is not allowed for a trustee to take any benefits from the trust funds. This however depends on what is a “benefit”.

The first thing you must understand is that trusts are of two types: private and public charitable trusts.

Indian Trusts Act 1882 covers only private trusts and it specifically excludes public charitable trusts from its ambit. Most people think that Indian Trusts Act 1882 also applies to public charitable trusts as well. But that is wrong. In some states, public charitable trusts are governed by Bombay Public Trusts Act 1950.

Social work is important for a better society.

Social work is important for a better society.

Both Bombay Public Trusts Act 1950 and Section 13 of Income Tax Act state that the trustees can draw a “reasonable” compensation from the trust fund for the services they provide to the trust. Please note that being a trustee itself is not considered a service. Lets try to understand what could be a defined as a service.

Lets assume, one of the trustee is a qualified Chartered Accountant –and if he is managing trusts accounts, he is eligible for reasonable compensation because  his work is saving the Trust from paying a CA’s fee.

“Reasonable” means that the compensation must not be higher than the prevailing average market rate. I would suggest that such a compensation should actually be a notch below the average (after all you’re supposed to be doing charitable work -so it’s better to put the least possible burden on Trust Funds)

If one or more trustees are taking unreasonable benefits from the Trust Fund –the Income Tax Department may refuse/revoke the allotment of tax exemptions under section 12A and 80G. If that happens all the donations/earnings acquired by the Trust shall become taxable.

For more information, you should contact the Commissioner of Income Tax (Exemptions) who has jurisdiction over your area.


  1. shijith vc says

    Thers is no prohibition to remunerate interested person but such remuneration should be commensurate with services rendered by him-(DIT (Exemptions)v.Manav Bharathi child institute-ITOv. Human Resource Development & (ASBM Trust)[2011] 47 SOT 85 (Cuttack)

  2. says

    is it compulsory to register the trust? can i open public charitable trust? will i get rent if i accommodate the trust to my home and ultimately saving the rent for the trust office. will i get benefit of taking funds from all over world if i open a website for it? i am website developer. so will i get compensation for developing website of trust and web hosting and domain registration charges of the trust website? i am from ahmedabad, gujarat. please provide your valuable feedback to me. Thanks & Regards, Divyesh

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