The speaker introduces CA Dr. Rakesh Gupta, highlighting his achievements and expertise in the field of income tax. The speaker also mentions Dr. Gupta's participation in international committees and his upcoming discussion on private trust concepts and tax issues.

Introduction and Background

C.A.B. Vivek Khuranaji welcomes Dr. Rakesh Gupta and expresses gratitude for his participation. Dr. Gupta is praised for his knowledge and hard work. The topic of private trust is introduced, and it is mentioned that many queries and confusion exist regarding trust concepts.

Opening Remarks and Welcome Address

Dr. Gupta discusses the mystery surrounding the taxability of private trusts and the lack of understanding of relevant sections of the Income Tax Act. He mentions the need for a basic understanding of tax laws and highlights the changes made to prevent misuse of trusts for tax planning purposes.

The Mystery and Taxability of Private Trusts

Dr. Gupta explains the basic concepts of trusts, including the definition of a trust, the roles of the settler, trustee, and beneficiary, and the transfer of trust property. He also discusses the rights of beneficiaries and the requirements for creating a valid trust.

Basic Concepts of Trusts

The various advantages of creating private trusts are discussed, including safeguarding the interests of beneficiaries, estate planning, protection from attachment of assets, and tax planning benefits. The differences in tax liability between trusts and other business entities are also highlighted.

Advantages and Purposes of Private Trusts

This chapter discusses the tax advantages of trusts compared to companies, including the absence of corporate surcharges, dividend distribution tax, and MET liability in trusts.

Tax Differences between Companies and Trusts

This chapter explains the concept of deemed dividend in closely held companies and highlights that trusts do not have a similar concept.

Deemed Dividend in Closely Held Companies

This chapter discusses the assessing officer's ability to examine the reasonableness of expenditure claimed against business and profits in companies, while trusts are not subject to this examination.

Reasonableness Examination for Expenditure in Companies

This chapter explores the application of section 79 in closely held companies, which denies the carry forward of losses, whereas trusts do not have this limitation.

Section 79 and Carry Forward of Losses

This chapter highlights the personal liability of directors in private companies under section 179 of the income tax act, whereas trusts do not have any personal liability.

Personal Liability in Private Companies

This chapter discusses the unlimited liability of partners in partnerships, contrasting it with the absence of unlimited liability in trusts.

Unlimited Liability in Partnerships

This chapter explains the limitations on remuneration in partnership firms under section 40 small b, which do not apply to trusts.

Limitations on Remuneration in Partnership Firms

This chapter discusses the distribution of capital assets in partnership firms under section 45-4, which is not applicable in trusts.

Distribution of Capital Assets in Partnership Firms

This chapter explores the provisions of section 78 subsection 2, which denies the carry forward of losses attributable to retired or deceased partners in firms, whereas trusts are not subject to this provision.

Loss Carry Forward for Retired Partners

This chapter discusses the joint and several liability of partners in partnerships for tax obligations, while trusts do not have this concept.

Joint and Several Liability in Partnerships

This chapter explains the limitations on payments to relatives in proprietorships under section 40A2, which do not apply to trusts.

Limitations on Payments to Relatives in Proprietorships

This chapter introduces private trusts and discusses the types of trusts, including specific trusts, discretionary trusts, and accumulated trusts.

Introduction to Private Trusts

This chapter explains the tax treatment of income earned by private trusts and defines the representative status of trustees under section 160 subsection 1.

Tax Treatment and Representative Status of Trustees

This chapter discusses the tax liability of trustees and the assessment process, including the determination of tax in the like manner and to the same extent as the beneficiaries.

Tax Liability of Trustees and Assessment

This chapter explores the taxation of business income in trusts and the application of the maximum marginal rate, with exceptions for trusts created through a will for the exclusive benefit of dependent relatives.

Taxation of Business Income in Trusts

This chapter explains the assessment process and tax liability of trustees, including the determination of tax in the same status as the beneficiaries and the limitation that the tax payable cannot exceed the tax payable by the beneficiaries.

Assessment and Tax Liability of Trustees

This chapter discusses the interpretation of the phrase "in like manner and to the same extent" in relation to the tax liability of trustees, as explained by the Kerala High Court and the Supreme Court.

Interpretation of "In Like Manner and to the Same Extent"

This chapter explains that each beneficiary's tax liability should be separately assessed in the same manner as if they were assessed directly, with the trustee's assessment order containing separate computations for each beneficiary.

Assessment of Trustees and Beneficiaries

This chapter emphasizes that the tax liability of trustees should be the same as that of the beneficiaries, taking into account the status and tax payable of each beneficiary.

Tax Liability of Trustees and Beneficiaries

This chapter discusses the exception for trusts created through a will for the exclusive benefit of dependent relatives, where the business income is taxed in the same manner and to the same extent as that of the beneficiaries, without the application of the maximum marginal rate.

Exception for Trusts Created by Will

This chapter discusses the taxability of a private specific trust and explains that the income of the trust is taxed in the same manner and to the same extent as that of the beneficiary.

Taxability of Private Specific Trust

This chapter explains the taxability of a private discretionary trust and states that if the income distribution is solely at the discretion of the trustees and the beneficiaries' shares are indeterminate and unknown, the income of the trust is subject to tax at the maximum marginal rate.

Taxability of Private Discretionary Trust

This chapter discusses the exceptions to the taxability of a discretionary trust. It explains that if certain conditions are met, such as none of the beneficiaries having any other income above the basic exemption limit, the income of the trust may be taxed at the slab rate applicable to individuals.

Exceptions to Taxability of Discretionary Trust

This chapter covers the taxation of business income in a discretionary trust. It states that if the trust's income consists of business income, it will be subject to tax at the maximum marginal rate, unless certain exceptions apply.

Taxation of Business Income in Discretionary Trust

This chapter discusses the tax implications of settling trust property. It explains that in certain situations, such as when the trust is settled by the settler for the benefit of a relative or a non-relative, there may be no capital gains tax liability. It also addresses the tax liability when the property is transferred to the beneficiary by the trustee.

Tax Incidence on Settlement of Trust Property

This chapter addresses various miscellaneous questions related to private trusts, including the taxability of income, deductions under section 80C, the difference between a family trust and a will, and the distribution of assets in a charitable trust.

Miscellaneous Questions on Private Trusts

This chapter discusses the formation and taxation of private trusts. It also explains the process of dissolving a private trust and the treatment of assets shown in the trust's balance sheet.

Taxation of Private Trusts and Dissolution of Trusts

In this chapter, the speaker addresses various questions related to filing income tax returns for private trusts. It also covers the tax implications for beneficiaries of private trusts and the taxation of various types of income received by the beneficiaries.

Filing Income Tax Returns for Private Trusts and Taxation of Beneficiaries

This chapter focuses on tax planning through private trusts and highlights the benefits of using a private trust for tax purposes. It also discusses the tax advantages of private trusts, including the availability of slab rates and deductions under Chapter 6A.

Tax Planning and Benefits of Private Trusts

The speaker provides information on the dissolution of private trusts and the tax implications associated with it. It addresses questions related to the liability of government authorities to recover dues from properties held in private trusts and the attachment of properties in private trusts.

Dissolution of Private Trusts and Tax Implications

This chapter covers various miscellaneous questions related to private trusts, including the application of capital gains provisions, putting personal properties in private trusts for the benefit of children and grandchildren, and the taxation of private trusts created for the benefit of minors.

This chapter discusses the liability towards income tax and income of the trust, who pays income tax on payments made to beneficiaries, and whether a trust is entitled to various deductions for computing income tax liability.

Liability and Income Tax of the Trust

This chapter explains how income is computed for private discretionary trusts and specific trusts, depending on the type of trust and the rules governing the computation of income.

Computation of Income for Private Trusts

This chapter addresses the questions regarding beneficiaries and settlers of the trust, including whether a trustee can also be a beneficiary, the difference between private trust and public trust, and the role of the settler in the trust.

Beneficiaries and Settlers of the Trust

This chapter discusses the tax implications for trusts with non-resident beneficiaries and resident trustees, the transfer of income without transferring the asset, and the conversion of a public charitable trust into a private trust. It also provides guidance on filing income tax returns for private trusts.

Tax Implications and Filing of Returns

This chapter addresses various miscellaneous questions related to trusts, including the taxation of oral trusts, transfer of rights by a beneficiary, stamp duty requirements, and the tax implications of merging trusts.

Miscellaneous Questions on Trusts

- The speaker is CA Dr. Rakesh Gupta, who is a member of the income taxability tribunal and has authored books on taxation.
- He has appeared in high-profile cases and participated in international committees and meetings.
- The topic of the discussion is private trust concepts and tax issues.
- The speaker acknowledges the confusion and lack of understanding surrounding private trusts.
- He mentions that the taxability of private trusts requires understanding of the Indian Trusts Act and that it has been used as a tool for tax planning.
- The speaker will address questions related to the concept of private trusts, their advantages and disadvantages, tax planning aspects, tax liabilities, and remedies available to creditors.
- The speaker clarifies that a trust is not a legal entity, but the trustee is considered a person for tax purposes.
- He explains the definition of a trust and the roles of the settler, trustee, and beneficiary.
- The settler must be competent to enter into a contract.

- A settler must be competent to enter into a contract in order to transfer ownership of property.
- Minors cannot be settlers unless they obtain prior approval from the court.
- The trustee must be competent to hold the property, but not necessarily competent to enter into a contract.
- The beneficiary must be capable of holding the property, but if they want to transfer ownership, they must be competent to enter into a contract.
- The settler can also be the beneficiary, but not the sole beneficiary.
- If the beneficiary renounces their interest, the trust may fail unless there are other trustees or beneficiaries.
- The trust property must be transferable to the beneficiary.
- Trusts for immovable property must be declared in writing and registered.
- Trusts for movable property can be declared orally or in writing, but it is common to reduce them in writing.
- The trust is created when the settler indicates their intention, purpose, beneficiary, and trust property, and transfers the property to the trustee.

- The video discusses the creation and registration of private trusts in India.
- It explains that in order to create a trust, the settler must indicate their intention to create a trust, specify the purpose, beneficiary, trust property, and transfer the property.
- The beneficiary of a trust has the right to receive rent or profits from the trust property and can require the trustee to transfer the property to them.
- The beneficiary can also transfer their beneficial interest to another person without permission from the trustee or settler.
- To register a trust, a written instrument must be created and registered with the registrar, paying the necessary stamp duty.
- The video also discusses the advantages of creating a private trust, such as safeguarding the interests of beneficiaries, avoiding estate duty, protecting assets from attachment or outstanding debts, and tax planning.

- The liability in a trust is based on the beneficiaries and is not subject to corporate surcharge, dividend distribution tax, or MET liability.
- In a closely held company, there is a concept of deemed dividend, but this does not apply to trusts.
- Trust arrangements are not covered under section 48, which allows for examination of payments made to related parties.
- Section 79, which denies carry forward of losses in closely held companies, does not apply to trusts.
- Directors of private companies have personal liability, but this concept does not exist in trusts.
- Trusts do not have unlimited liability like partnerships, and there is no concept of 40 small b limitations on payments to partners.
- Trusts are not subject to section 45-4, which deems fair market value as sale consideration for distributed capital assets in partnerships.
- Section 78 subsection 2, which denies carry forward of loss for retired or deceased partners, does not apply to trusts.
- Partners in partnerships have joint and several liability for tax obligations, but this does not apply to trusts.
- Proprietorships are subject to section 40A2 limitations on payments to relatives, but this does not apply to trusts.
- Proprietorships have unlimited liability, while trusts do not.
- Trusts can pay remuneration to trustees without disallowance, unlike proprietorships.
- Trusts allow for set off of capital gains and losses among family members, unlike individual ownership.
- Private specific trusts have a single beneficiary clearly identified in the trust deed, while private discretionary trusts have indeterminate beneficiaries and income distribution at the discretion of trustees.

- The video discusses different types of trusts, including private discretionary trusts, specific and discretionary trusts, and private accumulated trusts.
- The tax treatment of income earned by private trusts is explained.
- The definition of a representative SSE (Section 160 subsection 1) is provided, along with the tax liability of the representative SSE (Section 161 subsection 1).
- The representative SSE is subject to the same duties, responsibilities, and liabilities as if the income was received by them personally.
- The tax is levied and recovered from the representative SSE in the same manner and to the same extent as it would be for the person they represent.

- The tax liability of a trust is determined based on the income received by the trustee and the extent to which it can be levied on the beneficiary.
- If the income includes business income, it is subject to the maximum marginal rate.
- However, there is an exception for trusts created through a will for the exclusive benefit of a dependent relative, in which case the income is taxed in the same manner as the beneficiary.
- The literal interpretation of the law states that if any part of the income is business income, the entire income is subject to the maximum marginal rate.
- The Kerala High Court has ruled that only the business income should be subject to the maximum marginal rate, while the rest of the income should be taxed in the same manner as the beneficiary.
- If there are multiple beneficiaries with determinate shares, the trustee may be assessed separately for each beneficiary, but the assessing officer can pass one assessment order with separate computations for each beneficiary.
- The trustee's tax liability is determined based on the status and tax payable by each beneficiary.
- The amount of tax payable by the trustee cannot exceed what would be payable by the beneficiary if they were assessed directly.
- The trustee's tax liability is determined based on the trust declaration and the status of the beneficiary.

- The taxability of specific trusts depends on whether they are income or business income
- Specific trusts with income are taxed at the same rate as the beneficiary, while specific trusts with business income are taxed at the maximum marginal rate
- Private discretionary trusts are taxed at the maximum marginal rate, unless certain conditions are met
- The first condition is that none of the beneficiaries should have other income exceeding the basic exemption limit or be a beneficiary of any other trust
- The second condition is that if the discretionary trust is a testamentary trust and the only trust created by the author, it will be taxed at the slab tax rate
- There are exceptions and exceptions to exceptions depending on whether the income includes business income and if it is derived from a trust created through testament for the exclusive benefit of a dependent relative
- The settlement of trust property may not incur capital gains tax if it is an irrevocable trust, but there may be tax liability under section 56-10 for the trust or trustee receiving the property if it is created for the exclusive benefit of a relative.

- CA Dr. Rakesh Gupta, a member of the income taxability tribunal and taxation author, discusses private trust concepts and tax issues.
- He clarifies that a trust is not a legal entity, but the trustee is considered a person for tax purposes.
- The roles of the settler, trustee, and beneficiary in a trust are explained.
- The creation and registration of private trusts in India are discussed.
- The advantages of creating a private trust, such as safeguarding beneficiaries' interests and tax planning, are mentioned.
- The tax treatment of income earned by private trusts is explained.
- The tax liability of the trustee is determined based on the income received and the extent to which it can be levied on the beneficiary.
- Different types of trusts, including private discretionary trusts, specific and discretionary trusts, and private accumulated trusts, are discussed.
- The taxability of specific trusts depends on whether they are income or business income.
- The settlement of trust property may not incur capital gains tax if it is an irrevocable trust, but there may be tax liability under section 56-10 for the trust or trustee receiving the property if it is created for the exclusive benefit of a relative.

- Section 56-10 of the Indian Tax Act excludes certain types of property from tax liability
- The question arises whether section 56-10 applies when property is settled by an individual through a trust for the benefit of a non-relative
- The property is received by the trustee on behalf of the beneficiary, not directly by the beneficiary
- Section 5 of the Act defines total income as including all income received on behalf of an individual, but this does not apply in this case
- The trustee receives the property with consideration, as directed by the trust, so section 56-10 does not apply to the trustee
- If the property is transferred to the beneficiary by the trustee, it can still be argued that it is received with consideration for a pre-existing right, and section 56-10 does not apply
- The tax implications for specific trusts where the beneficiary is a minor are discussed, and it is concluded that the minor cannot be taxed in this case.

- The income of a minor cannot be taxed as they cannot be assessed.
- The Madras High Court has ruled that income from accumulated trust cannot be taxed in the hands of the trustee.
- Changes in the taxation system led to the inclusion of income of the minor in the hands of the parent.
- Private specific trusts are taxed in the same manner and to the same extent as the beneficiary.
- Discretionary trusts and specific trusts with business income are taxed at the maximum marginal rate.
- Mutual association and private trusts are different, and loans between members are not applicable to trusts.
- Family trusts and wills serve different purposes, but a trust can be created through a will.
- Private trusts can spend money on community projects not covered under section 80G.
- The assessment status of a specific trust is the same as the beneficiary, while a private discretionary trust is treated as an individual.
- Private trusts can be formed for the benefit of handicapped persons by reposing confidence in a trustee and giving directions for the beneficiary's benefit.
- Conversion of a public charitable trust into a family trust is not allowed, and the trust will always remain public.
- Deductions under section 80C or chapter 6A can be claimed in the case of a specific trust, but not in the case of a private discretionary trust.

- The income of a trustee in a specific trust is taxed to the same extent as the beneficiary.
- Private discretionary trusts are treated as individuals for tax purposes and can avail deductions.
- Private trusts can be created on behalf of minor children to avoid income clubbing.
- Trusts holding agricultural land do not have to pay tax on agricultural income.
- Donors to private trusts are not eligible for tax deductions.
- Private trusts may be eligible for government schemes depending on state regulations.
- Private trusts are dissolved if their objectives become unlawful or achieved.
- Private specific trusts do not have a capital account structure for disproportionate withdrawals.
- Transfer of assets to a private trust is not considered a gift and may have tax implications.
- Taxation on distribution of funds from a trust depends on the type of trust and the approval of the trustee.
- Taxation impact if all members of the trust do not fall under the definition of relative under section 56.

- The video discusses various aspects of taxation and benefits of private discretionary trusts.
- There is a discussion on the taxation impact if all members of the trust do not fall under the definition of relative under section 56.
- The concept of pooling is explored, with pooling being a concept under the Hindu Undivided Family (HUF) but not under the trust.
- The video also addresses questions related to the transfer of shares to a family trust and the taxation implications.
- The topic of recovery of tax liabilities from trust property or beneficiaries is discussed.
- Other topics covered include the dissolution of private trusts, making trusts for the benefit of minor grandchildren, and taxation implications of trust distributions to resident beneficiaries.
- The video also touches on the filing of tax returns for private trusts and their taxation status as individuals or Association of Persons (AOP).
- The tax consequences of transferring assets to a private trust for the benefit of different family members are also explored.

- Discussion on various aspects of transferring property to a private trust, including the need for a deed of conveyance and registration
- Transfer to a private trust does not attract section 45 in the hands of the settler, but there is an exemption under section 47 clause 3 for the recipient
- Taxability of benefits received by beneficiaries in a private trust depends on the type of trust and whether the trustee has already been taxed
- Charitable trusts not registered under section 10, 11, or 12 of the Income Tax Act cannot be treated as private trusts
- Liability of a private trust with a dissolution clause is limited to the extent of the trust's property
- Supreme Court case of Kamalini Khatau clarified that the department can tax the beneficiary if income is received by them, but if income is first received by the trustee and then distributed to beneficiaries later, the department may not tax the beneficiaries
- Tax planning through private trusts can provide certain advantages, such as avoiding maximum marginal rate tax and creating trusts for dependent relatives or minors
- Requirements for a trust to be considered determinate are outlined in explanation 1 to section 164
- Genuineness of a trust created for the welfare of minors is not questioned as long as it is created in accordance with the Indian Trust Act
- Substance over form principle may not be applicable to trusts as they are structured in a specific form
- Private trusts can protect properties from attachment, but the trust must be created before any liabilities or legal proceedings arise.

- The video discusses various aspects of private trusts and their taxation implications.
- Private trusts are created to safeguard properties from attachment and liabilities towards banks and government authorities.
- The liability towards income tax or income of the trust is payable by the trustees.
- Income tax on payments made to beneficiaries is paid by either the trust or the beneficiaries.
- Private trusts can avail various deductions on expenses for computing income tax liability.
- The difference between private trusts and public trusts is explained.
- Public charitable trusts registered under the Indian Trust Act can avail taxation relief.
- Settlers can be beneficiaries, but not sole beneficiaries, according to the Trust Act.
- Precautions should be taken while drafting trust deeds to ensure they are not revoked.
- Tax implications differ based on the residential status of trustees and beneficiaries.
- Income from investments in trusts will be taxed in the same manner as the beneficiaries.
- Queries regarding trust property purchase, income from running a school, and oral trusts are addressed.

- Section 56-10 of the Indian Tax Act excludes certain types of property from tax liability.
- The tax implications of property settled through a trust for the benefit of a non-relative are discussed.
- The income of a minor cannot be taxed, and income from accumulated trusts cannot be taxed in the hands of the trustee.
- Different types of trusts have different tax implications, with private specific trusts being taxed the same as the beneficiary and private discretionary trusts being treated as individuals for tax purposes.
- Private trusts can be created for the benefit of handicapped persons and can spend money on community projects not covered under section 80G.
- Deductions under section 80C or chapter 6A can be claimed in the case of a specific trust, but not in the case of a private discretionary trust.
- Private trusts can be created to avoid income clubbing for minor children and do not have to pay tax on agricultural income.
- Private trusts may be eligible for government schemes depending on state regulations.
- Private trusts can be dissolved if their objectives become unlawful or achieved.
- Transfer of assets to a private trust may have tax implications and the taxation of trust distributions depends on the type of trust and the approval of the trustee.
- The video covers various aspects of taxation and benefits of private discretionary trusts, including the transfer of shares to a family trust and the recovery of tax liabilities from trust property or beneficiaries.
- Other topics discussed include the dissolution of private trusts, taxation implications of trust distributions to resident beneficiaries, filing tax returns for private trusts, and the tax consequences of transferring assets to a private trust for the benefit of different family members.

- Oral trusts are taxed at the maximum marginal rate (MMR) with no variation.
- Oral trusts can be reduced to writing after the death of the original settler.
- Transfer of rights by a beneficiary can be equated with section 50C provision.
- A settler can also be a managing trustee.
- Stamp duty only needs to be paid once from settler to trustee, not from trustee to beneficiary.
- Representatives of private discretionary trusts are taxed as individuals.
- The Bombay tribunal has made beneficiaries liable for tax in certain cases of abuse of provision.
- Amounts transferred by the settler after the creation of a private trust are not taxable.
- Registered private trusts cannot utilize 85%.
- If a minor cannot be taxed, the income would not be clubbed with the trustee's income.
- In case of the death of a beneficiary, the property will go back to the settler unless specified otherwise in the trust deed.
- Property cannot be transferred to another trustee, but more trustees can be included in the same trust.
- Private trusts do not require registration under 12AA.
- A chartered accountant firm cannot become a trustee of a private trust.
- Private trust returns are filed using ITR form number 5.
- Income of a private trust is assessed under section 161 and 164, read with section 5.
- Representative SSE must apply for a PAN number and use it for filing trust returns.
- Trust income does not include business income, and the tax rate depends on the type of trust.
- Losses under profits and gains of business are ignored for tax purposes.
- Tax liability for beneficiaries with different incomes depends on the type of trust.
- Private trusts can modify their objects if allowed in the trust deed.
- Private trusts can give interest-free loans to trustees if permitted in the trust deed.

- The video discusses various aspects of private trusts and their tax implications.
- It mentions that if the trust deed allows, the trust can be given to a minor beneficiary with income below the maximum exemption limit, resulting in no tax liability.
- It states that the transfer of assets to a trust by the settler will not be regarded as a transfer under section 45 if section 47 clause 3 applies.
- The possibility of merging two or more trusts is debated, with doubts about whether it can be done.
- The Supreme Court ruling states that instead of filing separate income tax returns for each beneficiary in a specific trust, the trustee can file one return with separate computations.
- The trustee, not the beneficiaries, is responsible for filing the income tax return in a specific trust.
- The video addresses questions about the taxation of gifts received by a private trust, the eligibility of NRIs as trustees, and the possibility of a public charitable trust becoming a beneficiary in a private family trust.
- It clarifies the difference between specific trusts and discretionary trusts.
- The video mentions that a trust created for a mentally unsound person will have tax liability in the same manner as other trusts.
- It states that private trusts should be filed using Form No. 5 for income tax returns.
- The video also discusses the taxation of trusts formed through wills, the attachment of trust property in case of dues to a bank, and the assessment of deity as a beneficiary.
- It clarifies that a trust created by will with appointed executors to spend income for charitable purposes will be taxed at the maximum marginal rate.
- The tax rate for a religious or charitable trust that is registered but has not claimed any exemption depends on whether the violation is due to section 13 or not.
- The video mentions that there are no provisions for the amalgamation of an Indian trust with an overseas trust created by the same settler.
- It concludes by stating that another session will be held to address the remaining queries on private trusts.

- Oral trusts are taxed at the maximum marginal rate (MMR) with no variation.
- Transfer of rights by a beneficiary can be equated with section 50C provision.
- Stamp duty only needs to be paid once from settler to trustee, not from trustee to beneficiary.
- Registered private trusts cannot utilize 85%.
- The Bombay tribunal has made beneficiaries liable for tax in certain cases of abuse of provision.
- Amounts transferred by the settler after the creation of a private trust are not taxable.
- In case of the death of a beneficiary, the property will go back to the settler unless specified otherwise in the trust deed.
- Private trusts do not require registration under 12AA.
- Private trust returns are filed using ITR form number 5.
- Income of a private trust is assessed under section 161 and 164, read with section 5.
- Tax liability for beneficiaries with different incomes depends on the type of trust.
- Private trusts can modify their objects if allowed in the trust deed.
- The video discusses various aspects of private trusts and their tax implications.
- The possibility of merging two or more trusts is debated, with doubts about whether it can be done.
- The Supreme Court ruling states that instead of filing separate income tax returns for each beneficiary in a specific trust, the trustee can file one return with separate computations.
- The trustee, not the beneficiaries, is responsible for filing the income tax return in a specific trust.
- The video addresses questions about the taxation of gifts received by a private trust, the eligibility of NRIs as trustees, and the possibility of a public charitable trust becoming a beneficiary in a private family trust.
- It clarifies the difference between specific trusts and discretionary trusts.
- The video mentions that a trust created for a mentally unsound person will have tax liability in the same manner as other trusts.
- The video also discusses the taxation of trusts formed through wills, the attachment of trust property in case of dues to a bank, and the assessment of deity as a beneficiary.
- It clarifies that a trust created by will with appointed executors to spend income for charitable purposes will be taxed at the maximum marginal rate.
- The tax rate for a religious or charitable trust that is registered but has not claimed any exemption depends on whether the violation is due to section 13 or not.
- The video mentions that there are no provisions for the amalgamation of an Indian trust with an overseas trust created by the same settler.
- It concludes by stating that another session will be held to address the remaining queries on private trusts.

#CASansaar #Trust #IncomeTax
Private Trust - Concepts & Tax Issues Dr. (CA) Rakesh Gupta, Ex Member - ITAT
Private Trust Taxation - Private Trust vs Public Trust.
Private Trust Registration Procedure
https://youtu.be/Cv6NpCHUVvw

DISCLAIMER :- 
This Video is for the purposes of information / knowledge and shall not be treated as solicitation in any manner or of for any other purposes whatsoever. 

It shall not to be used for any legal advice /opinion and shall not to be used to rendering any professional opinion. Viewers are advised to kindly go through to original Government publications / notifications and published case laws or judicial pronouncements. 

The statements and opinions expressed in video are those of the speaker and do not necessarily reflect those of the CA Sansaar or any of its employees. CASansaar Team does not take any responsibility for the views of the Speaker.

Good evening friends, a warm welcome to all.

He was appointed as a member income taxability tribunal at the age of 37 years posted at Hyderabad.

He co-authored with his partner Raj K Udgarwal 2 books published by leading publishers, Texman.

Search and Caesar and assessment of search cases, taxation of real estate developers and joint development arrangements.

He is recognizing as advocate and appearing in income tax appellate tribunal, high courts, and Supreme Court of India.

He has argued high-profile cases of the country at tribunal and high court, drawing wide media coverage.

He participated in United Nations Committee of Experts on International Cooperation in Text Matters, held at the United Nations headquarters in New York in April 2017 and April 2019, and at the European Union Headquarters in Geneva in October 2018.

He is a member of the International Association of Texts Judges and participated in its meetings held at Helsinki, Finland in October 2017 and Cambridge, United Kingdom in September 2019.

He was invited to address Chamber of Commerce and Industry on Finance Bill 2019 in Abu Dhabi and Bahrain.

Today, he will discuss on private trust concepts and tax issues.

And we have with us none other than C.A.B.

Sansar and his name is just enough for the C.A.s.

Vivek Khuranaji to welcome him and give him a welcome address.

Speaker of the day, very learned, very respected C.A.

Stuti Mahajan ji, all respected members of the profession and other members, a warm welcome to all of you and today's webinar and I hope everybody is fit and fine.

Today's topic is very interesting and first of all, my sincere thanks to Doctor Akesh Gupta in fact, thanks is a small word whenever we ask him for a webinar, he give us some new and new topic.

And this topic also is very well designed by Dr.

But for this, I know he did a very wonderful, I can say that hard work.

Even asked for the member if you have any queries, you can send us.

Really wonderful sir, hats off to you and regarding this private trust, many confusion with the members regarding the trust concepts.

What's their text issues and I think today, our all the issues will be sold by Doctor Rakesh Gupta and we received many appreciation.

It's a wonderful and I don't have words for you.

Stuti for having spoken good words for me.

In fact this is the topic which has eluded most of us And that is why when I coined about this topic, it was received with utmost warmth across the country.

And the kind of response I have received is mind boggling.

The kind of questions, the magnitude of questions are so overwhelming then let me see that to what extent I would be able to take them up, I would try to take them up.

But 1 thing which is there that this topic has remained a mystery.

Private trust taxability has remained a mystery and for no explicable reasons I have found that the sections 160 to 167A which are applicable in case of private trusts are somehow not read by us.

And Apart from this, the taxability of the private trust requires some basic understanding of the tax laws also.

When I say tax laws it means the Indian Trusts Act 1882.

There is another reason because of which this topic has received a lukewarm response is because of the apathy and the coldness which is shown by the tax administrators and the courts alike on this topic because the trust vehicle is considered as a tool for tax planning.

And in the past, it has been so used also and because of the wide ranging user of this as a tax planning or tax awardance vehicle, wholesale changes had been brought from time to time and therefore all those aspects of the tax planning now have by and large been plugged by the legislature.

Now, most of the questions which have been received by me from my fellow professional colleagues, most of them, I mean, some of them are on different aspects.

But then they revolve around as to what is the concept of private trust?

Why should 1 go in for the creation of the private trust?

And what about the tax liabilities arising out of because of this trust arrangement.

Now what are the remedies available with the creditors, I mean so on and so forth.

Therefore, before I come to the questions raised by my friends, I think that let us deal with certain basic concepts because those concepts have got the direct bearing on the taxability of the private trust s taxability.

So first of all let us understand this thing that the trust is not a legal entity.

If you read the Income Tax Act, the definition of person under section 2, now trust is not the entity or the person.

Trustee is an entity and that too qua the income received or receivable on behalf or for the benefit of the third person only to that extent he is a Representative SSE.

He is an SSE And a trust is not an entity for the purpose of income tax act this was so said by honorable Bombay High Court in Vivandiwala's case in A year 2001 at page 267.

So let us be very clear because many times our friends do ask that this will be assessed in the hands of the trust.

Now what is the tax liability of the trust, whether the trust is an AOP, like all those kind of questions.

Now, we'll take a backseat when we come to know that the trust is not a person.

Trust may be legal entity for different purpose.

But so far as income tax act is concerned the trust is not an entity, the trustee is a person, representative SSE, trustee is a representative SSE and is assessed as such in that capacity.

So first of all let us understand as to what is the trust.

Now it says the trust is an obligation annexed to the ownership of property and arises out of a confidence reposed in and accepted by the owner.

So the trust is an obligation which is annexed and which is attached with the ownership of a property and arises out of the confidence which this owner reposes in somebody else and that somebody else is the trustee for the benefit of the beneficiary.

So, the ownership of the property, confidence is reposed by the owner of the property in the trustee that you kindly hold this property for the benefit of this beneficiary.

So this arrangement in the scheme of this thing, now the person who transfers the property or who settles the trust is called the settler or the author.

The confidence which is reposed by the person is the owner of that property because after all that owner transfers the legal ownership of his property to the trustee.

The person who accepts that confidence is called the trustee.

And the person on whose behalf that confidence is accepted, it s called the beneficiary.

And the subject matter or the property which is the subject matter of this trust is called the trust property or the trust money.

Now, there are, very quickly we will take certain important things.

That is settler must be a person who must be competent to enter into the contract.

If that settler is not competent to enter into the contract, obviously then he cannot transfer the ownership of the property.

Therefore he has to be a person who is competent to enter into the contract.

Now for that reason, a minor cannot be, because the minor cannot enter into, is not competent to enter into the contract, therefore he cannot be the settler.

But then he can be settler in some special circumstances when the prior approval is obtained from the court, the principal civil court of the original jurisdiction.

Then after obtaining the approval from the principal civil court, then even the minor can be the settler.

Barring this exception, only those persons who are competent to enter into the contract can be the settler.

Now this trustee who accepts the confidence, now he must be competent to hold the property.

He may not be competent to enter the contract.

But then he must be capable of holding the property.

He may not be a person who can be competent to enter into the contract.

But then if he has to exercise the discretion, then obviously since he will have to exercise his discretion in that case, some discretion is given by the settler or the trust, then in that situation, then he also must be the trustee, he also must be the person who is competent to enter into the contract.

So if he has not to exercise the discretion, then he must be a person who can merely hold the property.

Now the beneficiary, the beneficiary as I said is a person on whose benefit the property is or the confidence is accepted, the property is held.

And this beneficiary also should be capable enough of holding the property.

He need not be a person who is competent to enter into the contract.

But then if later on the beneficiary wants that property to be transferred to him and therefore in order to give directions to this effect to the trustee then he should be competent to enter into the contract.

So, if he is not required to give any direction at any point of time in future to the trustee that you kindly transfer the ownership to me then he should be capable of holding the property merely.

If he wants at any stage is required the trustee to transfer the property then in that situation he also should be a person who should be competent to enter into the contract.

Now the question who can be the beneficiary?

Even the author, oblique settler can also be the beneficiary.

This is very important because I am conscious that the Delhi bench of tribunal very recently in the case of escorts has said that there is nothing illegal if the settler is the sole beneficiary.

But then if we read the language of section 2 of the Indian Trust Act, now that says read with section 5 of the Transfer of Property Act, then it is more than clear that the author oblique settler cannot be the sole beneficiary.

Of course, he can share the ownership because if we read section 5 of the transfer of property act that says transfer means the transfer from 1 living person to another living person and of course the corporations have also been recognized living persons.

So transfer from 1 living person to another living person.

Now if in a trust where the author makes himself as the beneficiary, the sole beneficiary, that doesn't mean anything because he was earlier the owner and here also he is the owner.

But then he can be into the shared ownership.

So he can create, he can create or he can transfer that property in conjunction or in association with some other beneficiary then that is permissible.

But then if he wants to remain as a sole beneficiary, then this transaction of ownership cannot be said to have been transferred from 2 living persons.

Yes, of course, along with 1 other person he can be.

Then this beneficiary may renounce his interest under the trust.

Like the trustee is also not bound to accept that confidence.

In that situation, if he is the sole trustee and he says ok he is not interested in accepting that confidence, then the trust fails, the property then will not be transferred to him and property will remain with the settler.

But then if there is more than 1 trustee, then even if 1 of them declines to accept that confidence, then the rest of the trustees will continue to act as trustees.

Similarly, if there is a single beneficiary, sole beneficiary and if he disclaims and he says that I am not interested in the largesse shown by the settler, now in that situation the trust would fail.

The property would go back to the settler.

But then if there are other beneficiaries and 1 of them, even if it declines then the remaining beneficiaries would hold the property.

So this is, now regarding the trust property, it must be property transferable to the beneficiary.

Kindly do mind it, this trust property which is the subject matter of the trust must be a property which is capable of being transferred and in that sense the law says that it should not be merely a beneficial interest under a subsisting trust because that is also an asset, that is also a transferable asset.

But then that property must not be merely a beneficial interest under a subsisting trust.

Now trust, how the trust of immovable property has to be created.

It says that no trust, it starts with a negative covenant.

No trust in relation to the immovable property is valid unless it is declared by a non-testamentary instrument in writing.

So this property which is immoral property, the trust in relation to the immoral property is valid only if it is in writing, signed by the author and of course it is registered.

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Private Trust - Concepts & Tax Issues by Dr. Rakesh Gupta | Private Trust Taxation