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

Priya, a resident individual, transferred shares to a trust under a revocable transfer, retaining the power to take back the shares after 4 years. The trust received dividend of Rs 60,000 from these shares in tax year 2026-27. How is the dividend treated?

The dividend of Rs 60,000 is included in Priya's total income. Income arising from assets under a revocable transfer is taxed in the transferor's hands, and Priya retains the power to reassume the shares, so the transfer is revocable.

  1. ATaxable in the trust's hands only
  2. BIncluded in Priya's total income because the transfer is revocableCorrect
  3. CTaxable in the hands of the beneficiaries
  4. DExempt as the transfer is to a trust

Explanation

Income arising to any person by virtue of a revocable transfer of assets is included in the total income of the transferor. Priya can take back the shares, so the transfer is revocable and the Rs 60,000 dividend is clubbed with her income.

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