How taxable is family trust?
A family trust typically pays zero tax on income from within the trust. Instead, the income is distributed to the beneficiaries, who are taxed at their personal tax rates. They are free to distribute the income to as many beneficiaries as they see fit.
What is family trust in India?
The Indian Trust Act, 1882, governs a Private Trust. The purpose of the family trust is for the settlor to progressively transfer his assets to the trust, so that legally the settlor owns no assets himself, but through the trust, beneficiaries get the benefit of these assets.
Are family trusts tax deductible?
In general, the trust must pay income tax on any income its assets generate. But if the terms of the trust require it to pay out its income to a beneficiary, then the trust itself is entitled to get a deduction for any distributable net income.
Who controls a family trust?
At the core of a family trust, there are three parties: a grantor, a trustee and the beneficiaries. The grantor is the person who makes the trust and transfers their assets into it. The trustee is the person who manages the assets in the trust on behalf of the beneficiaries.
Why have a family trust?
The purpose of a Family Trust is to establish a way for your family to reap direct financial benefits from your Estate Planning efforts. Whereas other types of Trusts can list any number of friends, family members or organizations as beneficiaries, Family Trusts only involve your own family members.
How is a private family trust taxed in India?
The Indian Trust Act, 1882, governs a Private Trust. Private trust is a vehicle through which property can be transferred from one person (owner) to another for the benefit of an individual or an ascertainable group of people.
Is the income of a family trust taxable?
Income of a family trust (hereinafter referred to as a trust) may be taxable at the normal slab rates of income tax, or in some rare cases may become liable to a maximum marginal rate of income tax.
How is a religious trust registered in India?
For possessing the advantage of exclusions under the income tax act, 1961, the temples -‘Religious Trusts’ have to get themselves registered under the ‘income tax act’ under section 12AA. If the objects of temple have been modified, the temple has to apply for the modification of the Registration Certificate.
How is income of discretionary trust taxed?
As per Section 164 of the Act, all income of a discretionary Trust is taxable at Maximum Marginal Rate, i.e. the tax rate (including surcharge) applicable in relation to the highest slab of income in the case of an individual.
