In case of the tax exempt trust of a person who is resident in India, the trust is subject to the GST tax and the tax payable on the income earned by such person on and after 1st January 2020 is subject for assessment under the provisions of the Income Tax Act, 1961.
For the purpose of this article, “income” means income from employment and other sources.
In the case of a trust that is subject of a tax exemption, the person liable for the tax under the GST will be treated as a resident of India for the purpose in which the trust was formed.
This is also the case with respect to trust beneficiaries.
The tax exempt trusts of beneficiaries of trusts established before 1st December 2013, as well as the trust beneficiaries of the trusts established after 1, 2013, can be incorporated by filing an application to the Revenue Department with the information provided by the trust in respect of income or assets that the trust owns or is deemed to own.
In such cases, the information will be required to be verified against the information furnished by the beneficiaries in respect to the trust.
The trust is treated as an incorporated trust.
If the beneficiaries are residents of India, and the trust has not been incorporated, then the beneficiary is deemed a resident and will pay tax under that Act.
The beneficiary of a registered foreign trust, as defined in section 501 of the Indian Telegraph Act, 1947, is a resident in the country in which he or she is resident, unless he or She has resided outside India for a period of more than 180 days.
A person who resides outside India is not considered a resident for the purposes of section 501.
The beneficiary is entitled to the tax exemption from the tax imposed by the GST on income earned on and from such person’s residence.
The trust of the beneficiary of an exempt trust is not liable for assessment of the income or other sources of income of the trust if the trust, at the time the trust’s assets were acquired by the beneficiary, was an exempt foreign trust or a foreign exempt trust.
For this purpose, the income of a beneficiary of such a trust is considered to be earned on the basis of the assets acquired by that trust in the period of the foreign exempt trusts status.
The provisions of sections 7(1)(b) and 7(2)(b)(i) of the GST Act do not apply to trusts that are not exempt trusts, except in the case specified in section 7(3) of that Act, which allows the income tax payable from a trust of income from any source to be assessed on the assets of the exempt trust at the rate of 8% for each day after the date of acquisition of such assets.
The provisions of section 7 of the Act are also applicable to the taxable year of the taxable trust.
The income from the income from a taxable trust is taxable on the balance sheet of the account under which the taxable account is created, or under which it is assumed by the taxpayer in connection with the transaction.
The amount of tax that is payable by the taxable person for income from taxable trusts for a taxable year is the amount that is determined under the relevant provisions of this chapter for the taxable taxable year.
For the purposes, income is income from property, including a rental property or a rental income account, provided the income is derived from a particular source or source of income.
It is not income from an interest in a property or an interest income account of the taxpayer.
The term “income”, in relation to a taxable account, means the amount by which the amount of taxable income exceeds the amount taxed on that income by the applicable tax law for the particular taxable year under section 7.
For purposes of this sub-section, the amount taxable on the taxable income of an account shall be the amount, as adjusted for deductions under sections 7, 8, and 9 of the Revenue Act, 1861, which exceeds the lesser of (a) the amount determined by reference to section 7, (b) the lesser amount of income tax that would have been payable under the tax law under the applicable law for such taxable year if that tax law were applicable in respect thereof, or (c) the tax that, if the tax laws applicable in any other respect were applicable, would be the tax determined under section 6 of that section.
The Income Tax Department has, in accordance with the Income tax Act, issued a guidance document entitled Income Tax Guide for the Year 2020.
It contains a comprehensive guide to assess tax and provides an overview of the relevant aspects of taxation.
The guide provides detailed guidance on the application of section 67 of the ICT Act and the application and administration of sections 67(1),(2),(3),(4),(5),(6),(7),(8),(9),(10),(11),(12),(13),(14),(15),(16),(17),(18),(19),(20),(21),