Section 4 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.
Section 4 says a trust may be created for any lawful purpose, and then lists when a purpose is not lawful. A trust whose purpose is unlawful is void, and where one trust has a lawful and an unlawful purpose that cannot be separated, the whole trust is void. If you are drafting the purpose clause of a family trust, our agreement drafting team can help you word it clearly.
A trust may be created for any lawful purpose. A purpose is not lawful if it is forbidden by law, would defeat the provisions of any law, is fraudulent, involves injury to the person or property of another, or is regarded by the Court as immoral or opposed to public policy. Every trust with an unlawful purpose is void, and a trust with two inseparable purposes, one of them unlawful, is void as a whole.
The text
The section opens: "A trust may be created for any lawful purpose." It then says the purpose "is lawful unless it is (a) forbidden by law, or (b) is of such a nature that, if permitted, it would defeat the provisions of any law, or (c) is fraudulent, or (d) involves or implies injury to the person or property of another, or (e) the Court regards it as immoral or opposed to public policy."
The second paragraph says: "Every trust of which the purpose is unlawful is void. And where a trust is created for two purposes, of which one is lawful and the other unlawful, and the two purposes cannot be separated, the whole trust is void."
This article is about private trusts. The Act deals with private trusts, and public, charitable and religious trusts are governed by other laws; see private trust vs public trust for the difference.
The five tests, limb by limb
| Limb | Plain meaning |
|---|---|
| (a) Forbidden by law | A statute or rule prohibits the thing the trust is meant to do |
| (b) Would defeat the provisions of any law | The trust is not forbidden outright, but if allowed it would undo what a law is meant to achieve |
| (c) Fraudulent | The purpose is to deceive or cheat |
| (d) Injury to the person or property of another | The trust involves or implies harm to someone's body or property |
| (e) Immoral or opposed to public policy, in the Court's view | The Court decides; the Act leaves this to the Court |
Note the wording of (d): "involves or implies". The harm need not be stated in the deed. It is enough if the purpose, fairly read, carries that implication.
Severability: one lawful and one unlawful purpose
If a deed has two purposes, one lawful and one not, the question is whether they can be separated. The text says that if "the two purposes cannot be separated, the whole trust is void". The section does not say what happens when they can be separated. It is silent on that point, so a deed should not rely on any assumption; keep lawful purposes in a clean, stand-alone clause and do not blend them with anything doubtful.
The Explanation: foreign immovable property
The section carries an Explanation: "the expression 'law' includes, where the trust-property is immovable and situate in a foreign country, the law of such country." So where the trust property is immovable property in another country, the lawfulness test looks to that country's law too.
The Act's own illustrations
The Act gives three illustrations, which we restate in plain words:
- (a) A transfers property to B in trust to apply the profits to the upbringing of female foundlings to be trained as prostitutes. The trust is void.
- (b) A leaves property by will to B in trust to run a smuggling business and, out of the profits, support A's children. The trust is void.
- (c) A, while in insolvent circumstances, transfers property to B in trust for A during his life and after his death for B. A is declared an insolvent. The trust for A is invalid as against his creditors.
Illustration (c) is a useful reminder that a trust set up by someone already in financial trouble can be attacked by creditors. The text records the result as invalidity "as against his creditors".
A modern example of our own
Kavita Rao creates a trust and transfers a commercial shop to her cousin Nitin as trustee, with the stated purpose that the rent will pay for her grandchildren's school fees. The purpose is lawful. Now suppose a second clause tells Nitin to use part of the rent to pay a person to damage a neighbour's property. That second purpose "involves injury to the property of another" and is unlawful. Whether the whole trust fails turns on whether the two purposes can be separated; if the clauses are woven together so that they cannot be, section 4 says the whole trust is void. If the deed keeps them apart, the text of section 4 does not say in terms what follows, and the question needs advice on the actual deed.
A second example: Vivek, owing large sums to lenders, transfers his only flat to a trust for his daughter just before the lenders sue. Illustration (c) shows the risk: a trust created in insolvent circumstances for the settlor's own benefit is invalid as against creditors.
What the instrument of trust can change
Section 4 does not say "subject to the instrument of trust". The lawfulness test applies to the purpose whatever the deed says. A deed cannot make an unlawful purpose lawful by describing it kindly. What the deed controls is the choice of lawful purposes and how clearly they are stated.
Practical points
- Settlors: state each purpose in plain words and test it against the five limbs before signing.
- Trustees: if you suspect the deed carries a purpose that is unlawful, take advice before acting on it; section 4 says such a trust is void.
- Advisers: check the settlor's financial position at the time of creation, as illustration (c) shows.
- Registration and tax: these are separate subjects; see our income-tax guides, and note that registration of deeds depends on other laws.
Need help drafting a clear purpose clause?
A well-worded purpose clause avoids disputes later. Our agreement drafting service can prepare or review a private trust deed so that each purpose is stated plainly and kept separate. Bring your draft and a note of the people who are to benefit.
Key takeaways
- A trust may be created for any lawful purpose (s.4).
- A purpose is not lawful if forbidden by law, defeating any law, fraudulent, injurious to another's person or property, or immoral or against public policy in the Court's view.
- An unlawful trust is void; if lawful and unlawful purposes cannot be separated, the whole trust is void.
- For foreign immovable property, "law" includes that country's law.
- The Act's illustrations show void trusts and a trust invalid as against creditors.
Read next
- Section 5: trust of immovable property must be in writing and registered
- Section 6: how a trust is created, intention and declaration
- Definition and creation of trust: section 3
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.