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CA Intermediate · Taxation · Income of Other Persons included in Total Income of Assessee

Deepak, a resident individual, transferred a house to a trust on 1 May 2026 with a condition that the income shall be applied for the benefit of his wife during her lifetime, and the transfer is revocable at his discretion. The net annual income from the house for tax year 2026-27 is Rs 1,80,000. How is this income taxed?

The income is taxed in Deepak's hands. Income from assets transferred under a revocable transfer is clubbed with the transferor's income because he retains the power to re-assume control over the asset, so the Rs 1,80,000 is included in his total income.

  1. AIn the trust's hands only
  2. BIn the wife's hands as beneficiary
  3. CIn Deepak's hands, as the transfer is revocableCorrect
  4. DNot taxable as it is applied for the wife

Explanation

Where an asset is transferred under an arrangement that is revocable during the lifetime of the beneficiary, income arising from it is clubbed in the transferor's income. Deepak can revoke the transfer, so the income of Rs 1,80,000 is included in his total income. Taxation in the trust or the wife's hands would apply to an irrevocable transfer.

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