Sections 40-42 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.
Sections 40, 41 and 42 give a trustee three working powers. Section 40 lets him call in and vary investments, but needs a competent income-holder's written consent in one case. Section 41 lets him apply a minor's income for maintenance, education and similar expenses, accumulate the rest, and use capital only with Court permission. Section 42 lets him give written receipts that discharge the person paying. If your family trust is for a child's education, a legal consultation on how section 41 fits your plan can save a later dispute.
Section 40: a trustee may, at his discretion, call in trust property invested in any security and reinvest in securities mentioned or referred to in section 20, and vary investments, but where a person competent to contract is entitled to the income for his life or a greater estate, no change without his written consent. Section 41: for a trust for a minor, the trustee may apply income for maintenance, education or advancement in life, accumulate the residue, and may apply the capital only with the permission of a principal Civil Court of original jurisdiction. Section 42: a written receipt from the trustee discharges the payer, absent fraud.
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. These sections are about private trustees.
Section 40: power to vary investments
Section 40 reads: "A trustee may, at his discretion, call in any trust-property invested in any security and invest the same on any of the securities mentioned or referred to in Section 20, and from time to time vary any such investments for others of the same nature". The proviso: "where there is a person competent to contract and entitled at the time to receive the income of the trust-property for his life, or for any greater estate, no such change of investment shall be made without his consent in writing."
Section 40 points to section 20, which was substituted in 2016; the current content of that section should be checked in the official text (see our article on investment rules under section 20).
Section 41: maintenance of minors
Where property is held in trust for a minor, "such trustee may, at his discretion, pay to the guardians (if any) of such minor, or otherwise apply for or towards his maintenance or education or advancement in life, or the reasonable expenses of his religious worship, marriage or funeral, the whole or any part of the income to which he may be entitled in respect of such property".
| Feature | What the text says |
|---|---|
| Purposes | Maintenance, education, advancement in life, reasonable expenses of religious worship, marriage or funeral |
| Source | Income of the minor's property |
| Residue of income | The trustee "shall accumulate" it by compound interest, investing it and the resulting income in section 20 securities, for the person who ultimately becomes entitled |
| Proviso | The trustee may at any time apply the whole or part of the accumulations as if part of the income of the current year |
| If income is insufficient | The trustee may apply the property (capital) for those purposes with the permission of a principal Civil Court of original jurisdiction, but not otherwise |
| Local law | Nothing in the section affects local law relating to the persons and property of minors |
Points to note: the discretion is the trustee's ("at his discretion"); the duty to accumulate the residue is mandatory ("shall accumulate"); using capital needs the Court's permission, and the text says "but not otherwise".
Section 42: power to give receipts
Section 42 reads: "Any trustee or trustees may give a receipt in writing for any money, securities or other movable property payable, transferable or deliverable to them or him by reason, or in the exercise, of any trust or power; and, in the absence of fraud, such receipt shall discharge the person paying, transferring or delivering, the same therefrom, and from seeing to the application thereof, or being accountable for any loss or misapplication thereof." So a payer (for example a tenant or a bank) who gets a written trustee receipt need not check how the trustee spends the money, unless fraud is involved. It covers money, securities and "other movable property", not immovable property.
The Act's illustrations
No illustrations are printed under sections 40, 41 or 42 in our source.
A modern example of our own
Shweta Kulkarni creates a trust with Rs 15 lakh in bonds for her son Yuvraj (aged 12). Her father Madhav (aged 70) is entitled to the income for his life, and Yuvraj then takes the capital. The trustee is Hari.
- Section 40: Hari wants to move part of the money out of one security into another of the same nature. He may do so at his discretion, but because Madhav is a person competent to contract entitled to the income for his life, Hari needs Madhav's written consent.
- Section 41: if instead the income were Yuvraj's, Hari could apply it to Yuvraj's school fee, pay it to Yuvraj's guardian or meet his reasonable religious or marriage expenses, and accumulate any surplus by investing it. If the income fell short of a hospital bill for Yuvraj, Hari could use capital only with the Court's permission.
- Section 42: the school asks for a receipt for the fee payment; the bond issuer asks for one for redemption proceeds. Hari gives a written receipt, and absent fraud the payer is discharged without checking how he applies the money.
What the instrument of trust can change
Sections 40 to 42 print no "subject to the instrument of trust" wording. A deed can still give specific directions on investment, maintenance and receipts, which will interact with the author's directions in section 11. Whether a deed can enlarge or reduce the Court-permission requirement in section 41 is not stated in the text, so a deed should be reviewed with advice.
Practical points
- Settlors: if you want money to be used for a child's education, say so and say who decides; also state who may receive receipts.
- Trustees: record each maintenance payment and its purpose; accumulate the rest; seek the Court's permission before touching capital.
- Income beneficiaries: your written consent is needed for a change of investment under section 40's proviso; give it in writing and keep a copy.
- Payers: a written receipt from the trustee protects you absent fraud.
- Tax: see our income-tax guides, for example taxation of trust in India, for how trust income is taxed; the Act is silent on tax.
Need help planning a trust for a minor?
If your trust is for a child, or you are a trustee deciding how far you can spend on a minor's needs, our legal consultation service can help. Bring the deed and details of the investments.
Key takeaways
- A trustee may vary investments at his discretion, but needs the written consent of a competent life income-holder (s.40).
- For a minor, income may be applied to maintenance, education, advancement and listed expenses; the residue must be accumulated (s.41).
- Capital for those purposes needs the permission of a principal Civil Court of original jurisdiction (s.41).
- A trustee's written receipt discharges the payer, absent fraud (s.42).
Read next
- Sections 37-39: power to sell in lots, special conditions and conveyance
- Sections 43-45: power to compound, trustee who disclaims or dies, suspension by decree
- Powers of trustees: sale, lease, investment
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.