Avoid Oral Trust for Tax Planning & Saving
Under
the provisions of Section 1 64A of the IT Act, any income, received by a
trustee on behalf of or the benefit of any person under an oral trust is
chargeable to income tax at the maximum marginal rate applicable to an
individual. Hence a trust should always be made through a written trust deed.
Where, however, an oral trust is created, the trustee must forward to the
concerned Assessing Officer, within three months, a statement in writing signed
by the trustees, setting out the purposes of the trust, particulars as to the
trustee, the beneficiaries and the trust property. Where this is done, the oral
trust would be regarded as a written trust.