Question ID : 39339

Private Trust

One of our Clients want to make a private trust for that he want to transfer land and builiding presently held by him, his father and mother. DLC rate of it is 2 Crores at nominal value. The beneficiaries of trust will be his father, mother and his two daughters. Will there be capital gain tax on this transfer. What will be the sale price the amount recorded in trust books or DLC Rate.

Hi Mr. Vipin, In my view, contribution/transfer of assets in a private trust would not attract capital gains tax if the trust is irrevocable during the lifetime of the beneficiary (Section 61 and 62). You can refer section 63 for the meaning of "revocable transfer". Section 47(iii) specifically provides that contribution of any capital asset under irrevocable trust would not be treated as "transfer" and accordingly would not fall under the rigours of capital gains. Above, I have dealt the specific issue of contribution of assets into private trust and not the other income-tax implications with regard to such trusts.