Zerodha trust account
Zerodha trust account is a trading and demat account opened in the name of a trust by Zerodha for managing the trust’s corpus or investable surplus in Indian financial markets. A trust in India is a legal arrangement whereby a settlor (the person creating the trust) transfers property to one or more trustees to hold for the benefit of specified beneficiaries, in accordance with the Indian Trusts Act, 1882 (for private trusts) or applicable public trust legislation (for charitable and religious trusts). Trusts are widely used for family wealth management, charitable endowments, and philanthropic activities.
The trust account at Zerodha allows trustees to invest the trust corpus in listed equities, mutual funds, and other securities, subject to the trust deed’s investment powers and applicable statutes.
Types of trusts eligible
Zerodha opens accounts for the following categories of trusts:
- Private trusts, Created for the benefit of specified individuals or families; governed by the Indian Trusts Act, 1882.
- Public charitable trusts, Created for charitable purposes (education, medical relief, poverty alleviation, advancement of religion, or any other object of general public utility); governed by state public trust legislation (e.g., Bombay Public Trusts Act, 1950; Rajasthan Public Trusts Act, 1959) or the Indian Trusts Act in states without separate legislation.
- Religious trusts, Trusts for religious purposes; often governed by state legislation and the Religious Endowments Acts.
- Gratuity, provident fund, and superannuation trusts, Trusts created by employers for employee benefit; these may have specific SEBI or PFRDA registration requirements.
Trusts created under the Waqf Act, 1995 (for Muslim endowments) are managed by Waqf Boards and typically do not open individual brokerage accounts through Zerodha.
Eligibility conditions
- The trust must have a valid trust deed (or trust instrument) clearly setting out the objects, the powers of trustees to invest, and the names of the trustees.
- The trust must have obtained a PAN from the Income Tax Department.
- Public charitable trusts must be registered under the applicable state public trust legislation and/or under section 12A/12AB of the Income Tax Act, 1961 (for income tax exemption purposes), where applicable.
- The trust must maintain a savings or current bank account in the trust’s name.
- Trustees must be Indian residents for standard trust account purposes; trusts with foreign trustees require FEMA clearance.
Documentation required
| Document | Notes |
|---|---|
| Trust deed | Executed on non-judicial stamp paper; must be registered with the Sub-Registrar if it involves immovable property or if state law requires registration |
| Registration certificate | Issued by the Charity Commissioner or equivalent authority (for public charitable trusts) |
| PAN card of the trust | Issued in the trust’s name |
| Section 12A/12AB registration (if applicable) | Certificate from the Income Tax Department for charitable trusts claiming exemption |
| Bank account proof | Cancelled cheque or bank statement from the trust’s bank account |
| Resolution of trustees | A formal trustee resolution authorising the opening of a brokerage account and naming the authorised trustee(s) |
| KYC of all trustees | PAN, Aadhaar, and address proof for each trustee |
| Beneficial owner declaration | Under PMLA rules; names any individual who exercises ultimate effective control over the trust, contributes 25%+ of funds, or is a beneficiary of 25%+ of assets |
| Specimen signature of authorised trustee | For account operations |
| Income proof | For F&O or derivative segment activation |
The trust deed’s investment clause is critical: if the deed restricts investments to certain categories (e.g., government securities only, as commonly specified in older trust deeds following conservative investment norms), investment in equity or F&O may not be permissible without an amendment to the deed. Trust deed amendments require compliance with the original deed’s amendment provisions, applicable state law, and potentially court approval for charitable trusts.
KYC process
Zerodha processes trust account applications physically. All documents are submitted to Zerodha’s registered office in Bengaluru. The authorised trustee(s) undergo IPV. Beneficial ownership verification is conducted under the PMLA framework: for charitable trusts, the senior management or the board of trustees is identified as the beneficial owners where no individual holds 25 per cent or more.
Segments available
| Segment | Available | Notes |
|---|---|---|
| Equity delivery | Yes | Subject to trust deed investment clause |
| Equity intraday | Yes | |
| Equity F&O | Yes | Income proof required; trust deed must permit |
| Currency derivatives | Yes | |
| Commodity derivatives | Yes | |
| Mutual funds (via Coin) | Yes | |
| IPO via ASBA | Yes | UPI ASBA not available |
Tax treatment
Tax treatment of a trust depends on its type and registration status:
Private trusts
Private trusts are taxed under Chapter XVI of the Income Tax Act, 1961. Depending on the nature of the trust:
- Specific trusts (where beneficiaries are known and their shares are determinate): income is taxed in the hands of the beneficiaries at their individual rates.
- Discretionary trusts (where income is distributed at the trustee’s discretion): taxed at the maximum marginal rate (30 per cent plus surcharge and cess) in the hands of the trust.
Capital gains on securities are included in the trust’s income and taxed at the applicable rate (20 per cent for STCG on listed equity with STT; 12.5 per cent for LTCG on listed equity above INR 1.25 lakh).
Charitable and religious trusts
Trusts registered under section 12A or 12AB of the Income Tax Act enjoy exemption from income tax on income applied for charitable or religious purposes (section 11). Investment income (dividends, capital gains) applied to the trust’s charitable objects is exempt. The trust must apply at least 85 per cent of its income in each year for its stated objects.
Income not applied in the year of receipt may be accumulated for up to five years under the provisions of section 11(2), subject to filing a notice with the Assessing Officer.
Anonymous donations in excess of INR 1 lakh or 5 per cent of total donations (whichever is higher) are taxed at 30 per cent under section 115BBC, even for exempt charitable trusts.
Investment powers and prudent investor standard
Trust deed investment clause
The breadth of the trust’s investment powers depends entirely on the trust deed’s investment clause. Trust deeds commonly contain one of three types of investment provisions:
- Restrictive clause, Limiting investments to government securities, fixed deposits with scheduled banks, or instruments listed in section 20 of the Indian Trusts Act, 1882 (the “Trustee Investments” section). This type of clause, common in older trust deeds, would preclude equity investments through a Zerodha account.
- Broad discretionary clause, Permitting the trustees to invest in any securities or instruments deemed fit, subject to the prudent investor standard. This clause supports equity, mutual fund, and F&O investments.
- Specified list clause, Listing specific categories of permitted investments (e.g., listed equity, direct mutual funds, government bonds). Trustees must verify that each contemplated investment falls within the list.
Section 20 of the Indian Trusts Act provides a default list of authorised investments for trustees who have no specific investment clause (or whose clause defers to the section 20 list). This list is conservative and does not include listed equities. Modern trust deeds for family wealth management typically override section 20 with a broad discretionary clause.
Charitable trust restrictions
For charitable trusts registered under section 12AB, there is an additional restriction under section 11(5) of the Income Tax Act: the trust must invest or deposit its corpus and accumulated income in the specified modes listed in section 11(5). The modes do not include listed equity shares. If a charitable trust invests in listed equity through a Zerodha account without proper legal basis, the investment income may be treated as taxable non-applied income, defeating the section 11 exemption.
The appropriate structure for charitable trusts seeking equity exposure is through equity mutual fund units (which may qualify as money market instruments or units of specified mutual funds under section 11(5)(xii)), rather than direct equity.
Private trusts and family trusts not registered under section 12AB are not subject to the section 11(5) restriction and may invest in listed equity freely (subject to the trust deed).
Platform access and reporting
Trustees operating a Zerodha trust account use Kite under the trust’s client credentials. Zerodha Console provides capital gains reports, holding statements, and tax P&L statements under the trust’s PAN. These reports are essential for:
- Preparation of the trust’s income tax return.
- Annual reporting to the Charity Commissioner (for registered public trusts).
- Beneficiary reporting in discretionary trusts where individual beneficiary income allocations are made.
Trustee change and account update
When a trustee retires, dies, or is replaced, the new trustees’ KYC must be submitted to Zerodha along with a fresh trustee resolution. The trust deed’s provisions for appointment and retirement of trustees govern the process; for charitable trusts, the Charity Commissioner may need to be notified of trustee changes.
References
- Indian Trusts Act, 1882.
- Bombay Public Trusts Act, 1950 (and equivalent state legislation).
- Income Tax Act, 1961, sections 11, 12A, 12AB, 115BBC, Chapter XVI.
- Prevention of Money Laundering Act, 2002, and PMLA Rules, 2005.
- SEBI (Depositories and Participants) Regulations, 2018.
- SEBI Master Circular on KYC, SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/37, dated 8 March 2023.
- SEBI Master Circular on AML/CFT, SEBI/HO/AFRO/AFP/CIR/2023/0003, dated 3 January 2023.