Distribution by pvt discretionary trust to its beneficiaries

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This query is : Resolved

Kunjan (Querist)

10 February 2025
a pvt.discretionary trust is partner in a partnership firm, trust received 80 lakhs as share of prift as it was partner in firm (claimed exmpt).

same amount was given by trust to individual beneficiary of the trust,

if a pvt.disc. trust gives a cheqe to its benefeciaries, i think its distrubtion of capital,, hence not taxable in beneferias's hands.

but AO taxed in beneficiarie's hands stating , pvt. disc. trust earned exempt income which it distribtuted to its beneficiary and hence, as beneficiary is not directly earning exempt income as partner in firm, its taxable in beneficiary as other source income.

my view--> trust has just distributed capital , where is it income of the beneferciary?
is ao right?

Nikhil Kaushik

Nikhil Kaushik (Expert)

15 February 2025 AO is right in stating that the income is in the hands of the beneficiary. Private discretionary trusts are just receiving the income on behalf the beneficiaries. beneficiaries need to pay tax on the income in their individual capacities.

The question here is a different one - if the original income was exempt, is it taxable in the hands of final recipient

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