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CMA Intermediate · Direct and Indirect Taxation · Residential Status and Scope of Total Income

The estate of the late Mr. Nair earned Rs. 6,00,000 in a tax year after his death. During that year, Rs. 2,50,000 of this income was distributed to a specific legatee, Ms. Meera. What is the estate income chargeable in the executor's hands, and where is the Rs. 2,50,000 taxed?

The executor is chargeable on Rs. 3,50,000 and Ms. Meera on Rs. 2,50,000. Income distributed to a specific legatee during the year is excluded from the estate's total income and included in the legatee's total income, so it is taxed once.

  1. ARs. 6,00,000 in executor's hands; Rs. 2,50,000 also taxed with Ms. Meera
  2. BRs. 3,50,000 in executor's hands; Rs. 2,50,000 taxed with Ms. MeeraCorrect
  3. CRs. 3,50,000 in executor's hands; Rs. 2,50,000 not taxed anywhere
  4. DRs. 2,50,000 in executor's hands; Rs. 3,50,000 taxed with Ms. Meera

Explanation

Under section 312(6), income distributed to or applied for a specific legatee in that year is excluded from the estate's total income and included in the legatee's total income. So the executor is taxed on 6,00,000 - 2,50,000 = Rs. 3,50,000, and Ms. Meera on Rs. 2,50,000. Option A double taxes, and option C leaves income untaxed.

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