Saturday 21 January 2012

TRUST : TAX TREATMENT


I am a retired Military Officer and have started a Private Trust for charitable purpose. The activities of my trust is going on well. Sir, I want to know about Tax treatment of such trusts?
Tax treatment of trusts:
• Approved retirement trusts are also exempt from tax.
• In the case of private trusts, if the individual shares of the beneficiaries are ascertainable, they are included in the individual taxable incomes, the tax assessment being made either directly on the beneficiary or on the trustee as a representative of the beneficiary. However, if the trust has income from business, the entire income from the trust is taxed in the hands of the trustee at the maximum marginal rate applicable to individuals unless the trust is created by will for the benefit of relatives. When the individual shares of the beneficiaries are indeterminate (i.e., discretionary trust), the entire income is taxed in the hands of the trustees, in most cases at the maximum marginal rate applicable to individuals.

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