Section 23 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
After saying that a trustee in breach must make good the loss, section 23 sets out when he must also pay interest. The rule is that he is not liable for interest, except in six listed cases. If a trustee has held back or misused trust money, a legal dispute resolution review of what was lost, and what interest may follow, is the practical next step.
A trustee committing a breach of trust is not liable to pay interest except in the listed cases (a) to (d). In case (a) he accounts for interest actually received; in (b), (c) and (d) for simple interest at six per cent per annum (as printed in the source), unless the Court otherwise directs. In (e) (failure to invest and accumulate) and (f) (using trust property in trade or business) he is liable for compound interest with half-yearly rests, and in (f) the beneficiary may instead choose the net profits.
Scope of the Act
The Act deals with private trusts. Public, charitable and religious trusts are governed by other laws; see private trust vs public trust. The first part of section 23 (liability to make good the loss) is in our article on liability for breach of trust.
The text
After the first paragraph, section 23 says: "A trustee committing a breach of trust is not liable to pay interest except in the following cases:" and then lists (a) to (d). A sentence follows: "He is liable, in case (a), to account for the interest actually received, and, in cases (b), (c) and (d), to account for simple interest at the rate of six per cent per annum, unless the Court otherwise directs." Items (e) and (f) are printed after that sentence in our source.
| Case | When it applies | What the trustee must account for |
|---|---|---|
| (a) | He has actually received interest | The interest actually received |
| (b) | The breach consists in unreasonable delay in paying trust money to the beneficiary | Simple interest at six per cent per annum, unless the Court otherwise directs |
| (c) | He ought to have received interest but has not | Same as (b) |
| (d) | He may be fairly presumed to have received interest | Same as (b) |
| (e) | The breach is failure to invest trust money and to accumulate the interest or dividends | Compound interest (with half-yearly rests) "at the same rate" |
| (f) | The breach is employment of trust property or its proceeds in trade or business | At the beneficiary's option, compound interest with half-yearly rests at the same rate, or the net profits made by that employment |
The six per cent figure and the rate for cases (e) and (f) ("the same rate") are printed in the source. We do not state that they are current; check the official text and any later amendment.
Two points on reading. The default is no interest: the word "except" makes the list exhaustive as printed. And case (f) gives the choice to the beneficiary, not the trustee, which matters where the trustee used trust money in his business.
The Act's illustrations
The illustrations of section 23 are printed after these paragraphs. These are the Act's own, restated in plain words; (a) and (b) are also referred to in our companion article.
- (a) A trustee improperly leaves trust property outstanding and it is lost. He must make good the property lost, but not pay interest on it.
- (b) A bequeaths a house to B to sell for C. B neglects to sell for a great length of time; the house deteriorates and its price falls. B is answerable to C for the loss.
- (c) A trustee unreasonably delays investing trust money under section 20, or paying it to the beneficiary. He is liable to pay interest for the period of the delay.
- (d) The trustee should have invested in section 20 securities (old clauses (a) to (d)) but kept the money. At the beneficiary's option he is charged with principal and interest, or with the securities he might have bought and the intermediate dividends and interest.
- (e) The deed directs investment in such securities or on mortgage of immovable property; the trustee does neither. He is liable for the principal money and interest.
- (f) The deed directs investment in such securities and accumulation of dividends; the trustee disregards it. At the beneficiary's option he is liable for principal and compound interest, or for the securities he might have bought with the accumulation from proper investment of the dividends.
- (g) Trust property is invested in one of those securities; the trustee sells it for a purpose the deed does not authorise. At the beneficiary's option he must replace it with the intermediate dividends and interest, or account for the proceeds with interest.
- (h) The trust property is land, sold to a purchaser without notice of the trust. At the beneficiary's option the trustee must buy other land of equal value on the like trust, or be charged with the proceeds with interest.
The illustrations use the old clause lettering of section 20, which was later substituted (see investment rules under section 20); read them for principle.
A modern example of our own
Ajay Saxena creates a trust to hold Rs 12 lakh for his daughter Isha, to be paid to her on turning 21. The trustee, Rakesh, keeps the money idle in his own current account for three years after Isha turns 21 and does not pay her. This looks like case (b): unreasonable delay in paying trust money to the beneficiary. Simple interest at the printed rate (six per cent per annum, unless the Court otherwise directs) is the measure.
Change the facts: Rakesh uses the Rs 12 lakh as working capital in his own shop. That is case (f). Isha may choose compound interest with half-yearly rests at the same rate, or the net profits Rakesh made with her money, whichever is better for her.
What the instrument of trust can change
The interest paragraphs carry no "subject to the instrument of trust" wording, but the Court can vary the rate in cases (b), (c) and (d). A deed can define investment and timing duties, which affects whether a breach occurs at all.
Practical points
- Trustees: do not mix trust money with your own or leave it idle.
- Tax: see our income-tax guides, for example taxation of trust in India.
Need help with a claim for interest or an account of profits?
If a trustee has delayed payment, left money idle or used it in business, our legal dispute resolution service can review the deed and the accounts. Bring the trust deed, bank statements and any demand letters.
Key takeaways
- A trustee in breach is not liable to pay interest except in cases (a) to (f).
- In (a): interest actually received. In (b), (c), (d): simple interest at six per cent per annum (as printed) unless the Court directs otherwise.
- In (e) and (f): compound interest with half-yearly rests; in (f) the beneficiary may elect net profits instead.
- The illustrations refer to the old section 20 clause list; read them for principle.
Read next
- Section 23: liability of a trustee for breach of trust
- Section 22: sale by a trustee directed to sell within a specified time
- Sections 27-29: several liability of co-trustees, payment without notice and forfeiture
Disclaimer: Based on the text of the Indian Trusts Act, 1882 as consulted on 1 October 2026 from a scanned copy; the Act applies to private trusts, and public, charitable and religious trusts are governed by other laws. This article is general information, not legal advice; check the official text and take advice before acting.