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

Under the Income-tax Act, 2025 as reproduced in the official text, how is the total income of a business trust charged to tax under section 223(2), subject to sections 196, 197 and 198?

The total income of a business trust is charged to tax at the maximum marginal rate, subject to sections 196, 197 and 198, as provided in section 223(2). It is not taxed at a flat 15% or at nil.

  1. AAt the maximum marginal rateCorrect
  2. BAt a flat 15% rate
  3. CAt the rate applicable to a domestic company
  4. DAt nil rate, since income is taxed only with the unit holders

Explanation

Section 223(2) states that, subject to sections 196, 197 and 198, the total income of a business trust is charged to tax at the maximum marginal rate. The 15% rate belongs to IFSC unit income under section 218, and the nil-rate option ignores sub-section (2) altogether.

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