Public trusts in Maharashtra can invest in equity mutual funds. Most don't know it.

Most public charitable trusts in Maharashtra keep their entire corpus in fixed deposits. Trustees generally assume this is what the law requires. For many trusts, it hasn’t been the requirement for some years.

The background

Section 35 of the Maharashtra Public Trusts Act, 1950 governs how trustees may invest trust funds. Historically, this confined trusts to a narrow list of instruments — government securities, scheduled bank deposits, and similar. Prudent, and in a period of high nominal interest rates, adequate.

The difficulty is inflation. A corpus earning 6.5% in a term deposit, taxed, against 5-6% inflation, is a corpus standing still or shrinking in real terms. For a trust whose obligations — school fees, medical assistance, staff salaries — rise with inflation every year, that’s a slow erosion of its ability to do its work.

Circular 619, issued by the Maharashtra Charity Commissioner, addresses this by permitting public trusts to invest a portion of their corpus in units of equity mutual funds, subject to conditions.

What trustees should establish first

This is where I’d urge care, because the details matter more than the headline:

• The trust deed governs. A circular permits; it does not override your own founding document. If your deed restricts investments to specified instruments, you may need an amendment or a Charity Commissioner application before anything else.
• The permitted proportion. The circular specifies a ceiling on how much of the corpus may go into equity mutual funds. Confirm the current figure and conditions with your legal advisor or the Charity Commissioner’s office directly — circulars are amended, and you want the version in force today, not a summary from a website.
• Board resolution and documentation. A properly minuted trustee resolution recording the decision, the reasoning, and the limits is not optional. It is the record that protects trustees personally.
• Scheme eligibility. Not every equity scheme will be appropriate. Trustee obligations run toward capital preservation and prudence, which argues strongly for large-cap and index-oriented schemes over thematic or small-cap ones.
• Tax position. Registered trusts under Section 12A have their own treatment. Confirm the capital gains position with your CA before, not after.

The horizon question

The single most important input is not which scheme. It’s when the money is needed.

Corpus that is genuinely permanent — an endowment funding an annual scholarship from its income — has a horizon measured in decades, and equity is defensible for a portion of it. Money earmarked for a building project in eighteen months has no business in equity regardless of what any circular permits.

A trust should map its corpus into buckets before it maps it into schemes:

Bucket	Horizon	Suitable
Operating float	0–12 months	Liquid funds, sweep FDs
Committed projects	1–3 years	Short-duration debt, FDs
Permanent corpus	5 years+	The portion eligible for equity

Why this matters

A trust with a ₹2 crore permanent corpus that moves an eligible portion from 6.5% fixed income to a diversified equity allocation over a long horizon is not gambling with charitable money. It is protecting the trust’s purchasing power so that its grant-making capacity in 2040 resembles its capacity today.

Doing nothing is also a decision, and it has a cost that compounds.

Getting it right

If you’re a trustee considering this, the sequence is: read your own deed, confirm the current text of the circular with the Charity Commissioner’s office, get your CA’s view on the tax position, pass a resolution, and only then look at schemes.

We handle the documentation and scheme-selection end of that for trusts across Maharashtra. The legal and tax verification should come from your own advisors — we’ll tell you exactly what to ask them.