Oral Trust AY 2026-27

Oral Trust

Introduction
An oral trust is a trust not declared through a written instrument, including any valid Wakf deed under the Mussalman Wakf Validating Act, 1913.

Recognition of Oral Trusts

• If a written declaration containing trust purpose, trustee details, beneficiaries, and trust property is submitted to the Assessing Officer within three months from the date of declaration of the trust, the oral trust is treated as a written trust.
• If no such declaration is made, it remains an oral trust for tax purposes.

Taxation of Oral Trusts

• Maximum Marginal Rate (MMR) [Section 164A]

o Income of an oral trust is taxed at MMR, whether received or receivable on behalf of a beneficiary.

• Taxation of Partially Taxable Trusts [Section 165]

o If only part of the trust’s income is taxable, tax is computed proportionally on the sum received by the beneficiary.