What is Trust?

A Trust is not a separate legal entity, therefore the tax law uses the concept of the representative assessee to tax the trust as given under section 160 of the Income Tax Act, 1961.

How it can be created?

Simply speaking a trust is only an ‘obligation’ created through a legal document like Trust-Deed, Will, or any other instrument to transfer the right or title of a property in the name of some beneficiary or the author of the trust deed himself or for the public at large (where the trust is created for public welfare).

An Overview of Trusts

What types of Trusts?

Trust can be of many types on a many basis. On the of revocation, trust can be revocable or irrevocable. On the basis of ownership trust can be Government or Non-Government trust. On the basis of Purpose Trust can be Charitable or Religious. Even trust can be Public or Private. The private trusts are further divided into oral and written trusts. Under the category of written trusts, these are further divided into discretionary and non-discretionary trusts.

Taxation of Trust

The scope of taxation of trust depends upon the type of trust and the status of trustees under that trust.

Income of representative assesses is taxable on behalf of the trusts, since the trust is not a separate legal entity.


The purpose of a representative assessee is to tax the income accruing under a trust. Generally, a person who is liable to pay tax on behalf of the trust is also entitled to retain the money so paid as tax on behalf trust from the income of the trust.

However, the income of such a trust is taxed at the maximum marginal rate applicable to such a representative person.


Certainly, the matter of taxability through representative assessee can arise only in the case of private trusts, because public trusts are managed by a board of trustees and the income of such trusts may be exempted subject to conditions of Sections 11, 12 and 13 of Income tax Act 1961.

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Mohd Zain
Category Income Tax   Report

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