Private non - discretionary trust (shares determinate)

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AK Venkatesh (Querist)
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22 November 2011 A private non discretionary trust recieved income from dividend and units of MF. it is exempt in trusts hands.Now if this dividend amount is distributed to beneficiaries will it be taxable in hands of beneficiaries ? cant we treat it like we treat in case of Demat shares where shares are in depositories name but dividend is recieved by beneficaries and is exempt in benificiaries hands?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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22 November 2011 Depositories are legal owner and the account holder is the beneficial owner of the shares kept in his account. The income as well as other benefits like rights, bonus shares etc are enjoyed by the beneficial owner.
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Dividend is not taxable in the hands of shareholder by the virtue of provisions prescribed in Section 10(34). It reaches to the account of the investor directly or it is not distributed at the discretion of the depository.
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In the question, the recipient is the trust, whereas in the case of depository the recipient is shareholder himself. It can be said that the beneficiary of a trust receives the amount as a result of application of income by the trust.
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