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CMA Final · Direct Tax Laws and International Taxation · Assessment of Trusts

Arth Securitisation Trust, a securitisation trust under section 221 of the Income-tax Act, 2025, earned ₹ 10,00,000 in the tax year, of which 60% was interest on loans and 40% was capital gains. Investor Meera holds 25% entitlement and was paid only ₹ 1,00,000 during the year; the trust did not pay or credit the rest of her share. What is the amount treated as credited to Meera on the last day of the tax year, in the same nature and proportion?

₹ 2,50,000 is treated as credited, being 25% of ₹ 10,00,000. It retains the trust's nature and proportion, so ₹ 1,50,000 is interest and ₹ 1,00,000 is capital gains. It is deemed credited on the last day of the tax year, and later payment is not taxed again.

  1. A₹ 1,00,000 only, as that was paid
  2. B₹ 2,50,000 in total, comprising ₹ 1,50,000 interest and ₹ 1,00,000 capital gainsCorrect
  3. C₹ 2,50,000, all as income from other sources
  4. D₹ 1,50,000 as the unpaid balance only, taxed in the year of payment

Explanation

Meera's share is 25% x 10,00,000 = ₹ 2,50,000. Under section 221(3), income not paid or credited is deemed credited on the last day of the tax year in her entitled proportion. Under 221(2) it keeps its nature: 60% = ₹ 1,50,000 interest and 40% = ₹ 1,00,000 capital gains. Section 221(5) then avoids double inclusion on actual payment.

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