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

Mr. Harish Nair is the sole owner of a building who transferred it to a trust for the benefit of his minor daughter Pooja, with a term that income will go to her. The transfer is revocable by Harish. During the tax year 2026-27, the building's income is Rs 2,40,000. Which statement is correct?

The Rs 2,40,000 is included in Harish's total income. Income arising to any person from assets transferred under a revocable transfer is taxed in the hands of the transferor, so the beneficiary status of Pooja or the existence of the trust does not change this.

  1. AIncome is taxed in Pooja's hands since she is the beneficiary
  2. BIncome is taxed in the trust's hands only
  3. CIncome is included in Harish's total income because the transfer is revocableCorrect
  4. DIncome is exempt as it is trust income

Explanation

Under the provisions on revocable transfers, income from assets transferred under a revocable transfer is included in the total income of the transferor. Because Harish can revoke the transfer, the Rs 2,40,000 is included in his income. Taxing Pooja ignores that the revocation power overrides the trust's beneficiary treatment.

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