INDIA Law and Practice Contributed by: Rishabh Shroff, Kunal Savani and Chirag Shah, Cyril Amarchand Mangaldas
3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities Trusts in India are based on the common law princi - ples and are classified under two broad categories being: • private trusts (for family inheritance or private pur - poses); and • public trusts (religious or charitable purposes). Further, under Indian taxation laws and the ITA, trusts can be either irrevocable or revocable and discretion - ary or determinate. Trusts are not recognised as a separate taxable unit under the ITA. However, the ITA provides that, in the case of a trust, trustees would be taxed as a “repre - sentative assessee” of the beneficiaries – ie, the trus - tees would be taxed in the same manner in which the beneficiaries would have been taxed. The taxability of the trustee depends on whether or not the share of the beneficiaries in the trust is determi - nate or known – ie, whether the trust is a determinate trust or a discretionary trust. In the case of a deter - minate trust (ie, where the name and share or interest of the beneficiary is known or determinable), the tax officer has the option to either assess the beneficiar - ies, or alternatively, the trustees. Thus, the income of trust may be assessed at the option of the tax officer, either in the hands of the beneficiary or in the hands of the trustee(s) as a representative of the beneficiar - ies. In the case of a discretionary trust (ie, where the share/interest of the beneficiaries is unknown or left to the discretion of the trustees), the trustee(s) would be liable as a representative of the beneficiaries, at the MMR as discussed in 1.6 Stability of Tax Laws . Further, in the event a settlor transfers the property to a trust under such provisions that any part of the income or assets so transferred may be retransferred to the settlor, such a trust is treated as a revocable trust under the ITA. In the case of a revocable trust, the income arising to such trust may continue to be taxed in the hands of such settlor.
In 2025, the Securities Exchange Board of India (SEBI) has revamped the rules of nominations with an aim to ease the nomination process in mutual fund folios and demat (dematerialised) accounts. These revamped rules bring about various welcome simplifi - cations such as reduction of the paperwork for claims, increase of permissible limit of nominees from three to ten and also enable the named nominees to act on behalf of incapacitated investors. Nomination has been made mandatory for sin- gle account holding and optional for jointly held accounts/folios. Documents like affidavits, indemni - ties, undertakings, attestations, or notarisations from the nominee/s are no longer required post the revamp rules issued by the SEBI. Building on this, the SEBI Board (in June 2026) approved comprehensive reforms to the transmission framework for securities, introducing a Quick Trans - mission Processing category for small-value claims with minimal documentation and doubling the limits for simplified documentation – from INR500,000 to INR1 million for physical holdings and from INR1.5 million to INR3 million for dematerialised holdings. These changes are yet to be formalised by way of publication, and the effective date will also be notified in due course. 2.7 Transfer of Assets: Digital Assets India does not have a law governing the transfer or transmission of digital assets such as email accounts and there is currently no unified approach to their “inheritance” or access by heirs. Service providers have their own policies in dealing with digital prop - erty upon the death of the account holder and often provide an option for nomination of a “legacy con - tact”. One should examine the policies of the relevant websites and services, based on which one may leave written wishes (including by way of Will) for their fam - ily on how they would want their digital material to be accessed and treated after their demise and align the legacy contacts, if nominated, with their bequests.
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