Skip to content

menu

Cyril Amarchand Mangaldas logo
homeabout usexpertisepeoplecontact
RSS LinkedIn Facebook Instagram Spotify
Search
Close

Private Client

Home » Can trustee also be a beneficiary while setting up a trust in India?

Can trustee also be a beneficiary while setting up a trust in India?

By Rishabh Shroff & Chirag Shah on January 18, 2023
Posted in Family Law
Listen to this post
Family Trust
Source: Livemint.com

The following article was first published in the Mint newspaper on 17th January, 2023. The same was written by our Private Client team at Cyril Amarchand Mangaldas, who frequently publish their comments and opinions in the Mint. The online version of the article can be found here.

‘Should I write a will or form a trust to distribute my assets?’, mentioned setting up a trust with a daughter as trustee and adding one more person as trustee and beneficiary. As far as I know, a trustee cannot be the beneficiary. Please confirm if this is correct.

—Dinesh Haria

When using a private trust in India, it is not unusual for the trustee to also be a beneficiary of such trust. There is no embargo under the Indian Trusts Act, 1882, which prohibits an individual to be a trustee as well as beneficiary. In practical terms, for most families which set up trusts for their family business and personal property, this is a common approach.

That said, from a tax perspective, if the same individual acts in all three capacities – settlor, beneficiary as well as the trustee of a private trust, such trust may be treated as a “revocable trust” and thereby does not achieve any tax or asset protection. This should definitely be avoided.

Who can donate to an Hindu Undivided Family (HUF), and what is the tax implication on various donations paid or received in an HUF account?

—Dr. Ajay Garg

A HUF comprises all persons forming part of one lineal family branch and having a common ancestor. All members of the family including a spouse / wife are regarded as ‘members’ of the HUF and have different legal rights in the HUF

Any person including an individual (being father, mother, sons, daughters-in-law, daughters, etc.) can contribute / gift monies to an HUF.

Under the Income Tax Act, 1961, any funds received by a taxpayer (including an HUF) as a gift without consideration is chargeable to tax in the hands of such taxpayer, if the aggregate value of such gift received in one FY exceeds ₹50,000.

However, gift received by an HUF from its members is specifically exempt from such taxation. Thus, there should not be any tax liability in the event a member of an HUF gifts money to the HUF.

Note, if a member of an HUF, gifts money to the HUF, any income arising from it will have to be clubbed with the income of such member.


Tags: Family Business, gift deed, Hindu Undivided Family (HUF), HUF Account, Income Tax Act 1961, Indian Trusts Act 1882, Private Trust in India, Taxation, Will, Will making
Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Rishabh Shroff Rishabh Shroff

Co-Head and Partner in the Private Client Practice at the Mumbai office of Cyril Amarchand Mangaldas. Rishabh specialises in family constitutions and settlements, trusts, wills and succession planning. He can be reached at rishabh.shroff@cyrilshroff.com

Read more about Rishabh Shroff
Photo of Chirag Shah Chirag Shah

Senior Associate in the General Corporate-Private Client Practice at the Mumbai office of Cyril Amarchand Mangaldas. He can be reached at ck.shah@cyrilshroff.com

Related Posts
Civil Procedure
Liability of Legal Heirs Vis-À-Vis Code of Civil Procedure
May 10, 2023
IFSCA-Relaxes-Rules-for-Family-Investment-Funds-in-GIFT-City-Blog
IFSCA Relaxes Rules for Family Investment Funds in GIFT City
March 13, 2023
Property
Senior Citizens: Supreme Court clarifies position on reclaiming conditional gift
January 17, 2023

Stay Connected

RSS LinkedIn Facebook Instagram Spotify
Subscribe to this Blog

About

A thought leadership initiative dealing with multidisciplinary aspects of family business and governance (intra family as well as vis-à-vis corporate entities), estate and succession planning (including non-resident legal and tax considerations), philanthropy and family disputes, amongst various other aspects.

Blog Authors Show/Hide

  • Cyril Shroff
  • Abhilash Pillai
  • Aditya Karekatte
  • Aditya Mehta
  • Akshara Shukla
  • Anand Yadav
  • Ankoosh Mehta
  • Ashlesha Mittal
  • Aviral Chauhan
  • Bharat Vasani
  • CAM Private Client Team
  • Chirag Shah
  • Divya Laxman
  • Guest Authors
  • Gurkaran Arora
  • Harsha Sudhindra
  • Harshita Fatesaria
  • Hita Agarwal
  • Kunal Gopal
  • Kunal Savani
  • LexBlog Success Team
  • Madhumita Paul
  • Manasvi Nandu
  • Manisha Kumar
  • Medha Kagali
  • Mehtab Khan
  • Namrata Kolar
  • Nikhil Agarwal
  • Nikhil Aradhe
  • Nilomi Doshi
  • Pragya Chandak
  • Pratyush Khanna
  • Preyanka Prabhakar
  • Priya Gupta
  • Radhika Parthasarathy
  • Raj Chheda
  • Radhika Gaggar
  • Rinkel Singh
  • Rohit Tiwari
  • Rishabh Shroff
  • Sagar Gaba
  • Samiksha Pednekar
  • Sanjana Rao
  • Shaishavi Kadakia
  • Shreya Laisetti
  • Siddhant Sharma
  • Smruti Shah
  • S.R. Patnaik
  • Sruthi Murali
  • Shishir Vayttaden
  • Tanya Singh
  • Vikash Kumar Jha
  • Vikram Bidvai
  • Vishal Ladhani
  • Vivaik Sharma
  • Yash J. Ashar

Firm Blogs

  • Competition Law
  • India Corporate Law
  • India Tax Law

Stay Connected

RSS LinkedIn Facebook Instagram Spotify

Topics

Archives

Recent Updates

  • Liability of Legal Heirs Vis-À-Vis Code of Civil Procedure
  • What is a living will and how is it different from a regular will?
  • HBO’s Succession: Reel-to-Real life lessons for Indian Family Businesses
  • IFSCA Relaxes Rules for Family Investment Funds in GIFT City
  • Can children claim rights over property that has been sold?
Cyril Amarchand Mangaldas logo
  • home
  • about us
  • expertise
  • people
  • contact
  • disclaimer
  • privacy policy

Follow Us

RSS LinkedIn Facebook Instagram Spotify
Copyright ©2023, Cyril Amarchand Mangaldas. All Rights Reserved.
Law blog design & platform by LexBlog LexBlog Logo