The Income Tax Appellate Tribunal (ITAT) Chennai has ruled that equity shares transferred to a private trust set up exclusively for the benefit of relatives are not taxable under Section 56(2)(x) of the Income Tax Act.
“The ITAT has effectively recognised that where a trust is created exclusively for the benefit of relatives, contributions to such a trust can be treated as indirect gifts to relatives and therefore fall within the exemption under Section 56(2)(x),” said Anil Harish, Managing Partner, D.M. Harish & Co.
What is private trust?
A private trust is a legal arrangement in which an individual, known as the settlor, transfers assets to another person or entity, called the trustee, who manages them for the benefit of designated beneficiaries. Establishing a private trust formalises this transfer and ensures that the assets are used solely for the benefit of the intended individuals, in accordance with the settlor’s wishes.
