Question

Trusts have a very particular treatment under tax law. Explain that tax treatment. Include in your discussion how tax law deviates in relation to the net income of a trust from the treatment of trust income per the ‘law of trusts’. Discuss, also, any possible future improvements or reforms that you think might be of benefit to the regime.

Answer 1

Charitable trust are the trust which are formed wuth the objective of providing relief to poor people, education relief or medical relief etc Basically the provisions of tax on income is charitable trust is defined in section 11-13 of Income Tax act 1961.

A trust can be private trust or it can be public charitable religious one.

A public charitable trust income is exempt subject to some conditions

private trust can be specific or Discrationary , specific is the one where share of each beneficiary is ascertainable and in discretionary share of beneficiary is uncertainable

income derived from private trust is taxed at the maximum marginal rate (MMR) It means the rate of Income Tax including surcharge is applicable in relation to highest slab of individual for that relevant year  

With regard to possible future reform for trust, it is totally uncertain to talk about benefits as tax laws and provisions change at regular intervals.