Comparison of section 307 "Charge of tax where share of beneficiaries unknown." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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....or assessment. Effective or commencement date: Not stated in the document. Background & Scope Statutory hooks: Clause 307 (Bill) refers to sections 303(1)(c) and (d) (representative assesses-special cases) and sets out how income is charged where beneficiary shares are not specified or are indeterminate. The clause deals with income receivable on behalf of or for the benefit of one or more persons where individual entitlement is not specified or ascertainable. Definitions: The clause itself supplies deeming rules in sub-section (5) defining when income is "not specifically receivable" and when individual shares are "indeterminate or unknown." No other definitions or external rules are provided in the Bill text presented. Statutory Provis....

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....ressly states the person and the individual shares and they are ascertainable on the date of that order or instrument, the income is to be treated as not specifically receivable or as shares indeterminate/unknown. Interpretation The Bill text indicates a legislative intent to treat unallocated or indeterminate beneficial interests in representative assesses as susceptible to top-rate taxation, subject to narrowly drawn exceptions. The provision uses deeming language to shift the burden of explicit specification onto orders/instruments/wakf deeds: express identification and ascertainability at the relevant date are decisive. The exceptions in sub-section (2) show a purposive mitigation where beneficiaries are economically modest (no other ....

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....med dependent relative and that is the only trust declared by the testator. Under Clause 307(2)(b) and (4), the income (including business profits) may be chargeable at the rate applicable to an association of persons rather than the maximum marginal rate. (This is a direct application of the text.) * Example 3: A settlor creates before 1 March 1970 a non-testamentary trust exclusively for relatives who were mainly dependent on the settlor. If the Assessing Officer is satisfied the trust was bona fide, sub-section (2)(c) permits tax at AOP rates. (Application of the textual condition.) Interplay The clause expressly refers to sections 303(1)(c) and (d) as the class of representative assesses to which it applies. It also references instr....

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.... wording (as corrected) clarifies that the maximum marginal rate applies to "such income or part thereof" rather than implying necessarily the whole of the income in all cases. This narrows the potential reach of the maximum marginal rate where only part of the income consists of business profits; it reduces the risk of an unduly broad application of the top rate. The corrigendum indicates a drafting correction; the documents do not state legislative debate or reason for correction. * Minor drafting variations in sub-section (2) and (4): The Bill uses the phrasing "such trust is the only trust declared by him" and "tax shall be charged at the rate applicable to an association of persons" in sub-section (4); the Act uses substantively iden....

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....ties should ensure written instruments expressly identify beneficiaries and state individual shares, and that contemporaneous records exist to show ascertainability. In historical trusts (pre-1970) the Assessing Officer's satisfaction as to bona fides is material; evidence of the circumstances of creation, dependency of beneficiaries and the settlor's intent will be relevant. The document does not prescribe specific forms of evidence or documentary standards. Key Takeaways * Clause 307 targets representative assesses where beneficiary shares are not specified or are indeterminate, subjecting such income to taxation at the maximum marginal rate. * Limited exceptions allow taxation at association of persons rates where beneficiar....