Indian law recognises two classes of trust, public and private, and within the private class four types: revocable, irrevocable, specific and discretionary. The type decides the tax rate. Get it wrong and section 307(1) of the Income-tax Act, 2025 charges the whole income at the maximum marginal rate, against a 5% stamp duty you have already paid to fund the trust.

A trust that settles immovable property is registered at the Sub-Registrar of Assurances, where stamp duty runs at 5% of market value in Maharashtra and Karnataka. The type of trust does not change that charge, but it decides how the trust is taxed and whether you can ever cancel it.

Where this page sits

This page covers the types themselves: the public and private split, the four private types, and how a testamentary trust differs from one made in your lifetime.

For what a family trust actually does, what it costs and how each type is taxed, the main guide carries the detail.

Related guides:

• Private family trust in India: the full guide
• The Indian Trusts Act 1882
• Family trust vs will
• What is a testamentary trust?

What is the difference between a public and a private trust?

A private trust benefits specific, identifiable people, usually a family. A public trust benefits an indeterminate section of the public, for a charitable or religious purpose. That is the whole of the distinction in principle, and almost none of it in practice, because what follows from it reaches into four separate statutes.

The split decides which statute governs you, where you register, what you are stamped and how you are taxed, so it is settled before anything else is. Private trusts sit under the Indian Trusts Act, 1882, whose section 1 expressly excludes public and private religious or charitable endowments. Those are governed by separate legislation and, in Maharashtra, by the Maharashtra Public Trusts Act under the Charity Commissioner.

The rest of this page is about private trusts. If you are setting up a charitable trust or an NGO, the route is different and this is not the page for it.

What are the four types of private trust?

A trust can be any combination of revocable or irrevocable, and specific or discretionary, and each of the four combinations is taxed differently.

Revocable trust

The settlor keeps the power to cancel the trust and take the property back. The deed has to say so. Under section 78 of the Indian Trusts Act, a trust not created by will can be revoked only with the consent of all beneficiaries competent to contract, or where the instrument itself expressly reserved that power to the settlor, so a deed that simply says nothing about revocation has not created a revocable trust.

Income from a revocable trust is clubbed back into the settlor's hands under sections 96 to 98 of the Income-tax Act, 2025, so the trust provides no income tax reduction at all. It also offers weaker protection from creditors, because property you can take back is property a court can reach.

Irrevocable trust

Once made, it cannot be undone except as section 78 allows. Most family trusts intended for protection are irrevocable, because a court can reach the assets in a trust the settlor is able to dissolve.

You give away control of the assets permanently, and if the family situation changes in fifteen years the document will not change with it.

Specific trust, which the Act calls determinate

The deed names the beneficiaries and states exactly what share each one takes. Where it does, the trustees are assessed as representative assessees under sections 303 and 304, and tax is charged at the rate applicable to each beneficiary's own share, exactly as if that beneficiary had received the income directly rather than through a trustee. A beneficiary in a low slab is taxed in a low slab.

Discretionary trust

The deed names a class of beneficiaries and leaves the trustees to decide who receives what, and when. A discretionary trust offers that flexibility, but its income is taxed at a higher rate than any of the others.

Where the shares are not stated, section 307(1) charges the entire income at the maximum marginal rate. Section 307(5) then defines "not stated" more strictly than most settlors expect: a beneficiary is treated as unidentified unless that person is expressly stated in the instrument of trust and identifiable as such on the date of the instrument, and the shares are treated as indeterminate unless they too are expressly stated and ascertainable on that same date.

The test is applied strictly to the deed as it stood on the day it was signed, and a clause left vague inside the document cannot be fixed afterwards.

What is a testamentary trust?

A testamentary trust is one created by your will rather than during your lifetime. It comes into existence on death, out of the estate. Families use it where the purpose is to look after a dependant who cannot be handed a lump sum and left to manage it.

It has one practical advantage worth knowing: because it is declared by will, section 78 allows it to be revoked at the testator's pleasure for as long as they are alive, which no lifetime irrevocable trust permits. The dedicated guide covers how it works.

Which type should a family choose?

That depends on what you are protecting, and for many families the answer is that they do not need a trust at all.

A trust is worth its stamp duty in four situations: where a dependant cannot manage money on their own, where a business must not be split among heirs, where a challenge to the estate looks likely, or where the assets need managing for years rather than distributing once. Where the estate goes to one or two capable people, a registered will does the same job and attracts no stamp duty at all, because neither the Maharashtra nor the Karnataka schedule charges a will.

Decide whether you need a trust or a will before you pay anyone to draft a deed.

FAQs

What are the main types of trusts in India?

Two broad classes and four private types. The classes are public trusts, serving a charitable or religious purpose, and private trusts, serving named people. The four private types are revocable, irrevocable, specific (determinate) and discretionary.

What is the difference between a public trust and a private trust?

A private trust benefits specific, identifiable people, while a public trust benefits an indeterminate section of the public for a charitable or religious purpose. Section 1 of the Indian Trusts Act, 1882 excludes public and private religious or charitable endowments from that Act, and they are registered, stamped and taxed under their own regimes.

Which type of trust is best for a family?

There is no single best type. Where the deed can name the beneficiaries and their shares, a specific irrevocable trust gives the best tax treatment, because the income is taxed at each beneficiary's own rate under sections 303 and 304. A discretionary trust gives flexibility instead, at the cost of the maximum marginal rate under section 307(1) where the shares are not stated.

Is a revocable trust worth setting up?

It gives you the power to undo the arrangement, but it gives you no tax reduction: income from a revocable trust is clubbed back to the settlor under sections 96 to 98 of the Income-tax Act, 2025. It also offers weaker protection from creditors, because property you can take back is property a court can reach.

How is a discretionary trust taxed in India?

Where the deed does not state the beneficiaries and their shares, the whole income is charged at the maximum marginal rate under section 307(1) of the Income-tax Act, 2025. Section 307(5) treats a beneficiary as unidentified and a share as indeterminate unless both are expressly stated in the instrument of trust and identifiable on the date it was made.

Can one trust be both discretionary and irrevocable?

Yes, a trust can be both, because revocability and determinacy are independent of one another. That is why the type matters twice over: once for whether you can undo the trust, and once for the rate its income is taxed at.

Does the type of trust change the stamp duty?

No. Stamp duty depends on whether the deed disposes property, not on the type of trust. In Maharashtra and Karnataka a trust deed that settles property is charged as a conveyance at 5% of market value regardless of whether the trust is revocable, irrevocable, specific or discretionary.