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

Which statement about the pass-through rule in section 223(1) for business trust distributions is correct under the Income-tax Act, 2025?

The pass-through does not apply to any sum referred to in section 92(2)(k) received by a unit holder from a business trust. Section 223(4) carves this out, so the rule in 223(1) is not unlimited and has no condition about trust tax payment or residence.

  1. AIt applies to every sum received by a unit holder, with no exception
  2. BIt does not apply to any sum referred to in section 92(2)(k) received by a unit holder from the business trustCorrect
  3. CIt applies only if the trust has paid tax at the maximum marginal rate
  4. DIt applies only to resident unit holders

Explanation

Section 223(4) excludes the section 223(1) pass-through for any sum referred to in section 92(2)(k) received by a unit holder from the business trust. Hence the rule is not unlimited. Nothing in the text makes it depend on the trust's tax payment or on the unit holder's residence.

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