Tax rate applicable on Trust
This query is : Resolved
27 October 2010
Sir,
In Wealth Tax, Trust is assessable as an individual.
But in Income Tax, in which capacity a trust will be assessble ??
Please give reply with the supporting provisions/cases details.
Thanks for your reply in advance.
In Wealth Tax, Trust is assessable as an individual.
But in Income Tax, in which capacity a trust will be assessble ??
Please give reply with the supporting provisions/cases details.
Thanks for your reply in advance.
27 October 2010
Trust will be assessable as artificial person.
This is a reiduary classification, those assessee who is not covered under any one ( individaul,HUF,Firm,Company, AOP, Local authority).
This is a reiduary classification, those assessee who is not covered under any one ( individaul,HUF,Firm,Company, AOP, Local authority).
27 October 2010
trsut is an AOP.
27 October 2010
There are two different expert opinions. So give me final conclusion.
26 July 2025
Great question! Here’s a clear explanation of how **trusts** are treated for **Income Tax** and **Wealth Tax** purposes in India:
---
### 1. **Income Tax Treatment of Trusts**
* **Trust is assessed as an Artificial Juridical Person** (AJP).
* This means the trust is a separate taxable entity, distinct from its trustees or beneficiaries.
* **Section 2(31) of the Income Tax Act, 1961** defines an "association of persons" (AOP) and a "body of individuals" (BOI), but a trust is **not automatically an AOP or BOI** unless created by an agreement or mutual understanding among members.
* Generally, a **private trust** (non-charitable) is treated as an **AOP** for tax purposes if it has multiple beneficiaries.
* **Public charitable trusts** registered under Section 12A are exempt from tax on income used for charitable purposes, but the trust itself is still treated as a separate entity.
---
### 2. **Wealth Tax Treatment of Trusts**
* Under the old **Wealth Tax Act**, trusts were assessed like an **individual** if the property belonged to the trust (for example, a discretionary trust).
* This is because the wealth tax law did not treat trusts as separate entities, but taxed the beneficial owners/individuals.
---
### 3. **Summary**
| Tax Type | How Trust is Assessed | Notes |
| ---------- | ------------------------------------------ | ---------------------------------------------------------------- |
| Income Tax | Artificial Person (AOP or separate entity) | Separate entity for income tax; trusts file returns under PAN |
| Wealth Tax | Like an Individual | Wealth tax is levied on beneficial owners or trustees personally |
---
### 4. **Supporting References**
* **Income Tax Act, Section 2(31)** (definition of AOP and BOI)
* Income Tax Department Circulars & Case Laws:
* *ITO v. Lotus Trading Co.* (ITAT Mumbai) — treating trusts as AOPs for tax
* CIT v. D. G. Sugars Ltd. — trust treated as separate entity
* Wealth Tax Act (now abolished) — treated trusts like individuals
---
### 5. **Final Conclusion**
* For **Income Tax**, trusts are **assessed as artificial juridical persons** (separate from individuals) — they file returns independently.
* For **Wealth Tax** (prior to abolition in 2015), trusts were treated similarly to individuals, i.e., taxed on beneficial ownership.
---
If you want, I can also help you with trust registration, tax filings, or compliance procedures. Just ask!
---
### 1. **Income Tax Treatment of Trusts**
* **Trust is assessed as an Artificial Juridical Person** (AJP).
* This means the trust is a separate taxable entity, distinct from its trustees or beneficiaries.
* **Section 2(31) of the Income Tax Act, 1961** defines an "association of persons" (AOP) and a "body of individuals" (BOI), but a trust is **not automatically an AOP or BOI** unless created by an agreement or mutual understanding among members.
* Generally, a **private trust** (non-charitable) is treated as an **AOP** for tax purposes if it has multiple beneficiaries.
* **Public charitable trusts** registered under Section 12A are exempt from tax on income used for charitable purposes, but the trust itself is still treated as a separate entity.
---
### 2. **Wealth Tax Treatment of Trusts**
* Under the old **Wealth Tax Act**, trusts were assessed like an **individual** if the property belonged to the trust (for example, a discretionary trust).
* This is because the wealth tax law did not treat trusts as separate entities, but taxed the beneficial owners/individuals.
---
### 3. **Summary**
| Tax Type | How Trust is Assessed | Notes |
| ---------- | ------------------------------------------ | ---------------------------------------------------------------- |
| Income Tax | Artificial Person (AOP or separate entity) | Separate entity for income tax; trusts file returns under PAN |
| Wealth Tax | Like an Individual | Wealth tax is levied on beneficial owners or trustees personally |
---
### 4. **Supporting References**
* **Income Tax Act, Section 2(31)** (definition of AOP and BOI)
* Income Tax Department Circulars & Case Laws:
* *ITO v. Lotus Trading Co.* (ITAT Mumbai) — treating trusts as AOPs for tax
* CIT v. D. G. Sugars Ltd. — trust treated as separate entity
* Wealth Tax Act (now abolished) — treated trusts like individuals
---
### 5. **Final Conclusion**
* For **Income Tax**, trusts are **assessed as artificial juridical persons** (separate from individuals) — they file returns independently.
* For **Wealth Tax** (prior to abolition in 2015), trusts were treated similarly to individuals, i.e., taxed on beneficial ownership.
---
If you want, I can also help you with trust registration, tax filings, or compliance procedures. Just ask!
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