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.

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

1. 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.

2. 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.

3. 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.

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 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.