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

Continuing the facts of Mahalaxmi Securitisation Trust, suppose the ₹4,00,000 not paid in year 1 was already included in Ramesh's total income for year 1 as accrued income. It is actually paid to him in year 2. What is the treatment in year 2 for that amount under section 221 of the Income-tax Act, 2025?

It is not included again in year 2. Income already taxed in the investor's total income because it accrued or arose in an earlier tax year is excluded in the tax year when the securitisation trust actually pays it, which avoids double taxation.

  1. AIt is taxed again in year 2 as it is actually received
  2. BIt is not included again in his total income in year 2Correct
  3. CHalf of it is taxed in year 2
  4. DIt is taxed in year 2 and the year 1 inclusion is reversed

Explanation

Section 221(5) says income already included in the investor's total income on account of accrual shall not be included in the tax year in which it is actually paid. This prevents double taxation. The reversal and half-taxation options are not provided.

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