Capital assets are classified as short-term or long-term based on their holding period. The taxation rules for both categories differ under the Income Tax Act, 1961. 1️⃣ Short-Term Capital Assets (STCA) ✔️ Assets held for ≤ 36 months (≤ 3 years) before transfer.✔️ For listed shares, equity mutual fuRead more
Capital assets are classified as short-term or long-term based on their holding period. The taxation rules for both categories differ under the Income Tax Act, 1961.
1️⃣ Short-Term Capital Assets (STCA)
✔️ Assets held for ≤ 36 months (≤ 3 years) before transfer. ✔️ For listed shares, equity mutual funds, and certain securities – holding period ≤ 12 months is considered short-term. ✔️ Gains taxed as per slab rates (for individuals) or flat 15% (for equities under Section 111A). ✔️ No indexation benefit available.
2️⃣ Long-Term Capital Assets (LTCA)
✔️ Assets held for > 36 months (or > 12 months for equities & specified assets). ✔️ Taxed at 20% with indexation (except equities, which are taxed at 10% without indexation if gains exceed ₹1 lakh under Section 112A). ✔️ Eligible for exemptions under Sections 54, 54F, 54EC, etc.
🚨 Key Budget 2024 Updates Considered
📌 Debt Mutual Funds – Always taxed as short-term, no LTCG benefit. 📌 Market-Linked Debentures (MLDs) – Always short-term, regardless of holding period. 📌 REITs & InvITs – Capital repayment now taxable.
Under the Income Tax Act, 1961, the transfer of capital assets between a wholly-owned subsidiary and its Indian holding company may be exempt from capital gains tax, provided certain conditions are met. Exemption Under Section 47(v) As per Section 47(v) of the Act, such a transfer is not treated asRead more
Under the Income Tax Act, 1961, the transfer of capital assets between a wholly-owned subsidiary and its Indian holding company may be exempt from capital gains tax, provided certain conditions are met.
Exemption Under Section 47(v)
As per Section 47(v) of the Act, such a transfer is not treated as a taxable transfer if:
The holding company is an Indian company.
The holding company holds 100% of the subsidiary’s share capital (directly or through its nominees).
If both conditions are fulfilled, no capital gains tax will be levied on the transaction.
Key Considerations
100% Ownership: The exemption applies only when the parent company holds the entire share capital of the subsidiary.
Holding to Subsidiary Transfers: Similar tax relief is available under Section 47(iv) when capital assets are transferred from a holding company to its wholly-owned Indian subsidiary.
Non-Compliance: If any of the conditions are not met, the transfer will be subject to capital gains tax.
This provision facilitates internal corporate restructuring within a group without attracting tax liabilities, ensuring smooth business operations.
Indexation benefits allow taxpayers to adjust the purchase price of assets for inflation, thereby reducing taxable capital gains. However, there are certain cases where indexation is not available for long-term capital gains (LTCG) under the Income Tax Act: Equity Shares and Equity-Oriented Mutual FRead more
Indexation benefits allow taxpayers to adjust the purchase price of assets for inflation, thereby reducing taxable capital gains. However, there are certain cases where indexation is not available for long-term capital gains (LTCG) under the Income Tax Act:
Equity Shares and Equity-Oriented Mutual Funds
LTCG on listed equity shares and equity-oriented mutual funds is taxed at 10% (without indexation) under Section 112A if the gain exceeds ₹1 lakh in a financial year.
Indexation benefit is not available for these assets.
Gains Taxed Under Special Provisions
LTCG on bonds or debentures (except capital indexed bonds and sovereign gold bonds) does not qualify for indexation.
Securities held by Foreign Institutional Investors (FIIs) are also taxed without indexation benefits under Section 115AD.
Budget 2025 Changes (If Implemented)
From July 23, 2024, indexation may no longer be available on real estate, gold, and debt mutual funds.
LTCG on these assets may be taxed at a revised rate (e.g., 12.5%) instead of the earlier 20% with indexation.
Thus, while indexation helps reduce tax liability, it is not available for specific asset classes, particularly equity shares, certain bonds, and securities taxed under special provisions.
If a startup issues equity shares at a price exceeding their fair market value (FMV), the excess amount was earlier taxed as income under Section 56(2)(viib) of the Income Tax Act. However, the Finance Act, 2024, abolished this provision, commonly known as the "Angel Tax." Now, startups are no longeRead more
If a startup issues equity shares at a price exceeding their fair market value (FMV), the excess amount was earlier taxed as income under Section 56(2)(viib) of the Income Tax Act. However, the Finance Act, 2024, abolished this provision, commonly known as the “Angel Tax.”
Now, startups are no longer liable to pay tax on the excess amount received over FMV for equity share issuance. This change aims to encourage investments in startups without tax burdens on fundraising activities.
Previously, eligible startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) were exempt from this tax under certain conditions. While this exemption is now redundant due to the abolition of Section 56(2)(viib), startups should still comply with regulatory guidelines for share issuance.
This legislative change significantly enhances the startup ecosystem by providing more flexibility in raising capital without additional tax implications.
Yes, interest received on compensation or enhanced compensation is taxable under the Income Tax Act, 1961. The tax treatment depends on the nature of the compensation and the provisions applicable. 1. Interest on Compensation for Land Acquisition (Section 56(2)(viii)) If interest is received on compRead more
Yes, interest received on compensation or enhanced compensation is taxable under the Income Tax Act, 1961. The tax treatment depends on the nature of the compensation and the provisions applicable.
1. Interest on Compensation for Land Acquisition (Section 56(2)(viii))
If interest is received on compensation or enhanced compensation awarded for compulsory land acquisition, it is taxed under “Income from Other Sources.”
Tax Rate: It is taxable at slab rates applicable to the recipient.
Exemption (Section 10(37)): If the land acquired was agricultural land in a rural area, the compensation itself is exempt from tax, but the interest remains taxable.
2. Interest on Compensation in Other Cases
If compensation is awarded in cases other than land acquisition (e.g., motor accident claims, delayed payments, consumer disputes, etc.), the interest component is taxable as Income from Other Sources.
Example: Interest on delayed payment of salary, compensation from court cases, etc., is also taxable.
3. Taxability in the Year of Receipt
As per Section 145B, interest on compensation or enhanced compensation is taxed in the year it is received, irrespective of the year in which it was accrued.
However, 50% deduction is allowed under Section 57(iv), meaning only 50% of the interest amount is taxable.
Conclusion
Interest on compensation, whether from land acquisition or other legal claims, is taxable under “Income from Other Sources.” However, if it is related to land acquisition, only 50% of the interest is taxable after deduction under Section 57(iv). The compensation itself (excluding interest) may be exempt depending on the nature of the asset involved.
The tax treatment of a forfeited advance deposit (Pagri) depends on the circumstances under which it is received. Below are different scenarios and their tax implications under the Income Tax Act, 1961: 1. Forfeited Advance on Sale of Property (Section 56(2)(ix)) If a seller receives an advance paymRead more
The tax treatment of a forfeited advance deposit (Pagri) depends on the circumstances under which it is received. Below are different scenarios and their tax implications under the Income Tax Act, 1961:
1. Forfeited Advance on Sale of Property (Section 56(2)(ix))
If a seller receives an advance payment from a buyer for the sale of property and later forfeits it due to non-completion of the transaction, the forfeited amount is taxable as “Income from Other Sources.”
No deduction or cost adjustment is allowed in respect of such forfeited amount against the cost of acquisition of the property.
2. Pagri Received by Landlord from Tenant
If a landlord receives Pagri (premium or goodwill) from a tenant in connection with letting out a property, it is taxable under “Income from House Property” or “Income from Other Sources” depending on the nature of the transaction.
If the Pagri is in the nature of capital receipt (one-time non-refundable amount), it may not be taxable immediately but could impact capital gains tax when the property is sold.
3. Pagri Received by an Existing Tenant
If a tenant receives Pagri from a new incoming tenant in exchange for vacating the premises, it is taxable as Capital Gains under “Income from Capital Gains.”
The amount is taxed as Long-Term Capital Gain (LTCG) if the tenant occupied the property for more than 3 years; otherwise, it is taxed as Short-Term Capital Gain (STCG).
4. Advance Deposit for Rent, Later Forfeited
If a landlord receives an advance rent deposit from a tenant and later forfeits it (for example, due to non-payment of rent or breach of contract), the amount is taxable as “Income from Other Sources.”
Conclusion
The taxability of a forfeited advance deposit or Pagri depends on who receives it and under what circumstances. If it is received by a seller of a property, it is taxed as “Income from Other Sources.” If received by a tenant, it is taxed under “Capital Gains.” If received by a landlord in connection with rent, it is taxed under “Income from House Property” or “Other Sources.”
If you receive any amount from your employer due to termination of employment, its taxability depends on the nature of the payment. Here’s how it is treated under the Income Tax Act, 1961: 1. Compensation for Voluntary Retirement (VRS) or Retrenchment Exempt up to ₹5,00,000 under Section 10(10C) ifRead more
If you receive any amount from your employer due to termination of employment, its taxability depends on the nature of the payment. Here’s how it is treated under the Income Tax Act, 1961:
1. Compensation for Voluntary Retirement (VRS) or Retrenchment
Exempt up to ₹5,00,000 under Section 10(10C) if received under a government-approved Voluntary Retirement Scheme (VRS).
Any amount exceeding ₹5,00,000 is taxable under “Income from Salary.”
2. Gratuity
If received as part of termination benefits:
Government employees: Fully exempt under Section 10(10)(i).
Private sector employees: Exempt up to the least of the following (Section 10(10)(ii)/(iii)):
₹20,00,000
Last drawn salary × 15 days × Number of years of service
Actual gratuity received
Any amount beyond the exemption limit is taxable under Salary Income.
3. Leave Encashment
Government employees: Fully exempt under Section 10(10AA)(i).
Private employees: Exempt up to the least of the following (Section 10(10AA)(ii)):
₹25,00,000
Last drawn salary × 10 months
Actual leave encashment received
Excess amount is taxable as Salary Income.
4. Retrenchment Compensation
Exempt up to the least of the following under Section 10(10B):
₹5,00,000
15 days’ average salary for each completed year of service
Actual retrenchment compensation received
Any amount beyond this limit is taxable as Salary Income.
5. Severance Pay or Ex-Gratia Compensation
Any severance or compensation not covered under the above provisions is fully taxable as Salary Income.
6. Notice Pay & Bonus
Any salary in lieu of notice period or bonus received is fully taxable under Income from Salary.
Conclusion
While certain termination benefits enjoy tax exemptions, others are fully taxable. To minimize tax liability, one can explore deductions under Section 89 (Relief for Salary Arrears & Compensation) or invest in tax-saving instruments.
A Deep Discount Bond (DDB) is a type of bond issued at a price significantly lower than its face value. It does not pay periodic interest (coupon payments). Instead, the investor receives the full face value at maturity, and the difference between the purchase price and maturity value represents theRead more
A Deep Discount Bond (DDB) is a type of bond issued at a price significantly lower than its face value. It does not pay periodic interest (coupon payments). Instead, the investor receives the full face value at maturity, and the difference between the purchase price and maturity value represents the gain.
Tax Treatment Under the Income Tax Act
Taxability at Maturity
The difference between the purchase price and the redemption value is treated as capital gains under the Income Tax Act.
If the bond is held for more than 36 months, the gain is classified as Long-Term Capital Gain (LTCG) and taxed at 20% with indexation.
If held for 36 months or less, it is considered Short-Term Capital Gain (STCG) and taxed as per the investor’s applicable income tax slab rate.
Transfer Before Maturity
If the bond is sold before maturity in the secondary market, capital gains tax applies based on the holding period as above.
TDS on Redemption
If issued by financial institutions, Tax Deducted at Source (TDS) may be applicable on maturity proceeds.
Deep discount bonds are commonly used for long-term investments, offering predictable returns while being subject to capital gains taxation upon redemption.
Difference Between Deep Discount Bonds, Zero Coupon Bonds, and STRIPS 1. Zero-Coupon Bonds:Zero-coupon bonds are issued at a discount to their face value and do not pay periodic interest. Instead, investors receive the full face value upon maturity. The return on investment is the difference betweenRead more
Difference Between Deep Discount Bonds, Zero Coupon Bonds, and STRIPS
1. Zero-Coupon Bonds: Zero-coupon bonds are issued at a discount to their face value and do not pay periodic interest. Instead, investors receive the full face value upon maturity. The return on investment is the difference between the purchase price and the redemption value.
2. Deep Discount Bonds: Deep discount bonds are a type of zero-coupon bond issued at a significant discount. They typically have a long tenure and offer high capital appreciation. The key difference is that these are usually issued with an exceptionally high discount compared to other zero-coupon bonds.
3. STRIPS (Separate Trading of Registered Interest and Principal Securities): STRIPS are created by separating the principal and interest components of a regular coupon-bearing bond. Each portion is sold individually as a zero-coupon security. These are often issued by government entities, allowing investors to buy either the principal or interest portion separately.
Key Differences:
Interest Payments: None of these instruments pay periodic interest. Returns are realized on maturity.
Discount Rate: Deep discount bonds are sold at a much higher discount compared to standard zero-coupon bonds.
Creation: Zero-coupon and deep discount bonds are issued directly, whereas STRIPS are created by breaking down existing coupon bonds.
These instruments are beneficial for long-term investors seeking assured returns with no reinvestment risk.
Yes, the monthly fixed amount you receive from a trust established by your father is subject to taxation under the Income Tax Act, 1961. The tax implications depend on the nature of the trust and its income distribution. Here's a breakdown: 1. Revocable vs. Irrevocable Trusts Revocable Trust: If youRead more
Yes, the monthly fixed amount you receive from a trust established by your father is subject to taxation under the Income Tax Act, 1961. The tax implications depend on the nature of the trust and its income distribution. Here’s a breakdown:
1. Revocable vs. Irrevocable Trusts
Revocable Trust: If your father retains control over the trust, making it revocable, the income generated is taxable in his hands.
Irrevocable Trust: If the trust is irrevocable, meaning your father has relinquished control, the taxation depends on the type of trust:
Specific (Determinate) Trust: If the trust deed specifies that you are entitled to a fixed monthly amount, this income is taxable in your hands as “Income from Other Sources.”
Discretionary Trust: If the trustee has discretion over income distribution, the trust is taxed at the maximum marginal rate, and the income is taxed in your hands only upon distribution.
2. Tax Rates and Deductions
Tax Rate: The income you receive is taxed according to your applicable income tax slab rate.
Deductions: You may be eligible to claim deductions under Sections 80C to 80U, depending on your specific circumstances.
3. Documentation
It’s essential to maintain proper documentation, including the trust deed and any income statements, to accurately report this income on your tax return.
Given the complexities involved in trust taxation, it’s advisable to consult a tax professional to ensure compliance with all applicable tax laws and to optimize your tax planning.
What is the difference between short term capital assets and long term capital assets?
Capital assets are classified as short-term or long-term based on their holding period. The taxation rules for both categories differ under the Income Tax Act, 1961. 1️⃣ Short-Term Capital Assets (STCA) ✔️ Assets held for ≤ 36 months (≤ 3 years) before transfer.✔️ For listed shares, equity mutual fuRead more
Capital assets are classified as short-term or long-term based on their holding period. The taxation rules for both categories differ under the Income Tax Act, 1961.
1️⃣ Short-Term Capital Assets (STCA)
✔️ Assets held for ≤ 36 months (≤ 3 years) before transfer.
✔️ For listed shares, equity mutual funds, and certain securities – holding period ≤ 12 months is considered short-term.
✔️ Gains taxed as per slab rates (for individuals) or flat 15% (for equities under Section 111A).
✔️ No indexation benefit available.
2️⃣ Long-Term Capital Assets (LTCA)
✔️ Assets held for > 36 months (or > 12 months for equities & specified assets).
✔️ Taxed at 20% with indexation (except equities, which are taxed at 10% without indexation if gains exceed ₹1 lakh under Section 112A).
✔️ Eligible for exemptions under Sections 54, 54F, 54EC, etc.
🚨 Key Budget 2024 Updates Considered
📌 Debt Mutual Funds – Always taxed as short-term, no LTCG benefit.
See less📌 Market-Linked Debentures (MLDs) – Always short-term, regardless of holding period.
📌 REITs & InvITs – Capital repayment now taxable.
Whether transfer of capital assets by subsidiary company to its Indian holding company is taxable as capital gain under income tax act?
Under the Income Tax Act, 1961, the transfer of capital assets between a wholly-owned subsidiary and its Indian holding company may be exempt from capital gains tax, provided certain conditions are met. Exemption Under Section 47(v) As per Section 47(v) of the Act, such a transfer is not treated asRead more
Under the Income Tax Act, 1961, the transfer of capital assets between a wholly-owned subsidiary and its Indian holding company may be exempt from capital gains tax, provided certain conditions are met.
Exemption Under Section 47(v)
As per Section 47(v) of the Act, such a transfer is not treated as a taxable transfer if:
If both conditions are fulfilled, no capital gains tax will be levied on the transaction.
Key Considerations
This provision facilitates internal corporate restructuring within a group without attracting tax liabilities, ensuring smooth business operations.
See lessWhen the benefit of indexation is not available in case of long term capital gain under income tax act?
Indexation benefits allow taxpayers to adjust the purchase price of assets for inflation, thereby reducing taxable capital gains. However, there are certain cases where indexation is not available for long-term capital gains (LTCG) under the Income Tax Act: Equity Shares and Equity-Oriented Mutual FRead more
Indexation benefits allow taxpayers to adjust the purchase price of assets for inflation, thereby reducing taxable capital gains. However, there are certain cases where indexation is not available for long-term capital gains (LTCG) under the Income Tax Act:
Equity Shares and Equity-Oriented Mutual Funds
Gains Taxed Under Special Provisions
Budget 2025 Changes (If Implemented)
Thus, while indexation helps reduce tax liability, it is not available for specific asset classes, particularly equity shares, certain bonds, and securities taxed under special provisions.
See lessIf a start-up sale it’s Equity in excess of fair market value, then is it liable for tax? Is there any exemption available to the start-up?
If a startup issues equity shares at a price exceeding their fair market value (FMV), the excess amount was earlier taxed as income under Section 56(2)(viib) of the Income Tax Act. However, the Finance Act, 2024, abolished this provision, commonly known as the "Angel Tax." Now, startups are no longeRead more
If a startup issues equity shares at a price exceeding their fair market value (FMV), the excess amount was earlier taxed as income under Section 56(2)(viib) of the Income Tax Act. However, the Finance Act, 2024, abolished this provision, commonly known as the “Angel Tax.”
Now, startups are no longer liable to pay tax on the excess amount received over FMV for equity share issuance. This change aims to encourage investments in startups without tax burdens on fundraising activities.
Previously, eligible startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) were exempt from this tax under certain conditions. While this exemption is now redundant due to the abolition of Section 56(2)(viib), startups should still comply with regulatory guidelines for share issuance.
This legislative change significantly enhances the startup ecosystem by providing more flexibility in raising capital without additional tax implications.
See lessIs interest received on compensation charged to tax under income tax act?
Yes, interest received on compensation or enhanced compensation is taxable under the Income Tax Act, 1961. The tax treatment depends on the nature of the compensation and the provisions applicable. 1. Interest on Compensation for Land Acquisition (Section 56(2)(viii)) If interest is received on compRead more
Yes, interest received on compensation or enhanced compensation is taxable under the Income Tax Act, 1961. The tax treatment depends on the nature of the compensation and the provisions applicable.
1. Interest on Compensation for Land Acquisition (Section 56(2)(viii))
2. Interest on Compensation in Other Cases
3. Taxability in the Year of Receipt
Conclusion
Interest on compensation, whether from land acquisition or other legal claims, is taxable under “Income from Other Sources.” However, if it is related to land acquisition, only 50% of the interest is taxable after deduction under Section 57(iv). The compensation itself (excluding interest) may be exempt depending on the nature of the asset involved.
See lessWhat is the income tax liability on forfeited advance deposit/Pagri?
The tax treatment of a forfeited advance deposit (Pagri) depends on the circumstances under which it is received. Below are different scenarios and their tax implications under the Income Tax Act, 1961: 1. Forfeited Advance on Sale of Property (Section 56(2)(ix)) If a seller receives an advance paymRead more
The tax treatment of a forfeited advance deposit (Pagri) depends on the circumstances under which it is received. Below are different scenarios and their tax implications under the Income Tax Act, 1961:
1. Forfeited Advance on Sale of Property (Section 56(2)(ix))
2. Pagri Received by Landlord from Tenant
3. Pagri Received by an Existing Tenant
4. Advance Deposit for Rent, Later Forfeited
Conclusion
The taxability of a forfeited advance deposit or Pagri depends on who receives it and under what circumstances. If it is received by a seller of a property, it is taxed as “Income from Other Sources.” If received by a tenant, it is taxed under “Capital Gains.” If received by a landlord in connection with rent, it is taxed under “Income from House Property” or “Other Sources.”
See lessI received amount from employer on termination of my job, is it taxable under income tax act?
If you receive any amount from your employer due to termination of employment, its taxability depends on the nature of the payment. Here’s how it is treated under the Income Tax Act, 1961: 1. Compensation for Voluntary Retirement (VRS) or Retrenchment Exempt up to ₹5,00,000 under Section 10(10C) ifRead more
If you receive any amount from your employer due to termination of employment, its taxability depends on the nature of the payment. Here’s how it is treated under the Income Tax Act, 1961:
1. Compensation for Voluntary Retirement (VRS) or Retrenchment
2. Gratuity
3. Leave Encashment
4. Retrenchment Compensation
5. Severance Pay or Ex-Gratia Compensation
6. Notice Pay & Bonus
Conclusion
While certain termination benefits enjoy tax exemptions, others are fully taxable. To minimize tax liability, one can explore deductions under Section 89 (Relief for Salary Arrears & Compensation) or invest in tax-saving instruments.
See lessWhat is deep discount bond? How to compute the tax liability under income tax act?
A Deep Discount Bond (DDB) is a type of bond issued at a price significantly lower than its face value. It does not pay periodic interest (coupon payments). Instead, the investor receives the full face value at maturity, and the difference between the purchase price and maturity value represents theRead more
A Deep Discount Bond (DDB) is a type of bond issued at a price significantly lower than its face value. It does not pay periodic interest (coupon payments). Instead, the investor receives the full face value at maturity, and the difference between the purchase price and maturity value represents the gain.
Tax Treatment Under the Income Tax Act
Taxability at Maturity
Transfer Before Maturity
TDS on Redemption
Deep discount bonds are commonly used for long-term investments, offering predictable returns while being subject to capital gains taxation upon redemption.
See lessWhat is the difference between deep discount bond, zero coupon bond and strips?
Difference Between Deep Discount Bonds, Zero Coupon Bonds, and STRIPS 1. Zero-Coupon Bonds:Zero-coupon bonds are issued at a discount to their face value and do not pay periodic interest. Instead, investors receive the full face value upon maturity. The return on investment is the difference betweenRead more
Difference Between Deep Discount Bonds, Zero Coupon Bonds, and STRIPS
1. Zero-Coupon Bonds:
Zero-coupon bonds are issued at a discount to their face value and do not pay periodic interest. Instead, investors receive the full face value upon maturity. The return on investment is the difference between the purchase price and the redemption value.
2. Deep Discount Bonds:
Deep discount bonds are a type of zero-coupon bond issued at a significant discount. They typically have a long tenure and offer high capital appreciation. The key difference is that these are usually issued with an exceptionally high discount compared to other zero-coupon bonds.
3. STRIPS (Separate Trading of Registered Interest and Principal Securities):
STRIPS are created by separating the principal and interest components of a regular coupon-bearing bond. Each portion is sold individually as a zero-coupon security. These are often issued by government entities, allowing investors to buy either the principal or interest portion separately.
Key Differences:
These instruments are beneficial for long-term investors seeking assured returns with no reinvestment risk.
See lessI am receiving a monthly fix amount from a trust created by my father, is it chargeable to tax under the income tax act?
Yes, the monthly fixed amount you receive from a trust established by your father is subject to taxation under the Income Tax Act, 1961. The tax implications depend on the nature of the trust and its income distribution. Here's a breakdown: 1. Revocable vs. Irrevocable Trusts Revocable Trust: If youRead more
Yes, the monthly fixed amount you receive from a trust established by your father is subject to taxation under the Income Tax Act, 1961. The tax implications depend on the nature of the trust and its income distribution. Here’s a breakdown:
1. Revocable vs. Irrevocable Trusts
Revocable Trust: If your father retains control over the trust, making it revocable, the income generated is taxable in his hands.
Irrevocable Trust: If the trust is irrevocable, meaning your father has relinquished control, the taxation depends on the type of trust:
Specific (Determinate) Trust: If the trust deed specifies that you are entitled to a fixed monthly amount, this income is taxable in your hands as “Income from Other Sources.”
Discretionary Trust: If the trustee has discretion over income distribution, the trust is taxed at the maximum marginal rate, and the income is taxed in your hands only upon distribution.
2. Tax Rates and Deductions
Tax Rate: The income you receive is taxed according to your applicable income tax slab rate.
Deductions: You may be eligible to claim deductions under Sections 80C to 80U, depending on your specific circumstances.
3. Documentation
It’s essential to maintain proper documentation, including the trust deed and any income statements, to accurately report this income on your tax return.
Given the complexities involved in trust taxation, it’s advisable to consult a tax professional to ensure compliance with all applicable tax laws and to optimize your tax planning.
See less