In case of a private discretionary trust, where the shares of the beneficiaries are unknown, trustee(s) will be liable to tax as a representative assessee at the maximum marginal rate of tax. However, the maximum marginal rate will not apply in the following cases and relevant income will be liable to tax in the hands of the trustees as if it were the total income of an association of persons—
- where none of the beneficiaries has any other income chargeable under the Act exceeding the maximum amount not chargeable to tax in the case of an association of persons or is a beneficiary under any other trust; or
- where the relevant income or part of relevant income is receivable under a trust declared by any person by will and such trust is the only trust so declared by him; or
- where the relevant income or part of relevant income is receivable under a trust created before 1-3-1970, by a non-testamentary instrument exclusively for the benefit of the relatives of the settlor, support and maintenance; or
where the relevant income is receivable by the trustees on behalf of provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession.
However, where the income consists of, or includes profits and gains of business, the entire income of the trust would be charged at the maximum marginal rate of tax, except in cases where the profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependant on him for support and maintenance, and such trust is the only trust so declared by him. In such cases, the income of the discretionary trust would be charged to tax at normal rates applicable to an association of persons and not at the maximum marginal rate of tax.