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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Nature of Business

Under section 223 of the Income-tax Act, 2025, income distributed by a business trust to its unit holders is treated in the unit holder's hands as:

Income distributed by a business trust keeps its character in the unit holder's hands. Under section 223(1) it is deemed to be of the same nature and in the same proportion as it was received by or accrued to the trust, so it is not recharacterised.

  1. AIncome of the same nature and in the same proportion as it was received by or accrued to the business trustCorrect
  2. BIncome from other sources regardless of its original nature
  3. CExempt income in all cases
  4. DCapital gains regardless of its original nature

Explanation

Section 223(1) provides that distributed income is deemed to be of the same nature and in the same proportion in the unit holder's hands as in the business trust's hands. It is not recharacterised as other sources income or capital gains, and it is not exempt merely because it is distributed.

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