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CS Executive · Tax Laws and Practice · Incomes which do not form part of Total Income

Under the Income-tax Act, 2025, a trust enumerated in Schedule VII fails to satisfy the conditions specified in that Schedule in a tax year. What is the consequence?

If a person listed in Schedule VII does not satisfy the specified conditions in a tax year, section 11(4) provides that the person's income is charged to tax under the Act for that tax year. The non-chargeability is conditional, so failure of conditions removes the protection.

  1. AOnly the income specified in Schedules II to VI is taxed, while the rest stays exempt
  2. BThe trust's income is charged to tax under the Act for that tax yearCorrect
  3. CThe trust's income is taxed only if the Assessing Officer issues a notice in the following year
  4. DThe trust is taxed only on income exceeding the basic exemption limit under Schedule VII

Explanation

Section 11(3) exempts persons in Schedule VII from tax on total income subject to conditions. Under section 11(4), if the conditions are not satisfied in a tax year, the income of such person is charged to tax under the Act for that year. The other options invent consequences not in the section.

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