What is Tax on income of unit holder and business trust?
What is Tax on income of investment fund and its unit
holders? Section 115UA and
Income Tax Act 1961
Tax on income of unit holder and business trust and Tax
on income of investment fund and its unit holders are
defined under sections 115UA and 115UB of Income Tax Act 1961.
Provisions under these Sections are :
Section 115UA of Income Tax Act "Tax on income of
unit holder and business trust"
Section 115UA. (1) Notwithstanding anything contained in any
other provisions of this Act, any income distributed by a
business trust to its unit holders shall be deemed to be of
the same nature and in the same proportion in the hands of
the unit holder as it had been received by, or accrued to,
the business trust.
(2) Subject to the provisions of section 111A and section
112, the total income of a business trust shall be charged
to tax at the maximum marginal rate.
(3) If in any previous year, the distributed income or any
part thereof, received by a unit holder from the business
trust is of the nature as referred to in clause (23FC) 96[or
clause (23FCA)] of section 10, then, such distributed income
or part thereof shall be deemed to be income of such unit
holder and shall be charged to tax as income of the previous
(4) Any person responsible for making payment of the
income distributed on behalf of a business trust to a unit
holder shall furnish a statement to the unit holder and the
prescribed authority, within such time and in such form and
manner as may be prescribed97, giving the details of the
nature of the income paid during the previous year and such
other details as may be prescribed.]
Following Chapter XII-FB, consisting of section 115UB, shall
be inserted after Chapter XII-FA by the Finance Act, 2015,
w.e.f. 1-4-2016 :
Section 115UB of Income Tax Act "Tax on income of
investment fund and its unit holders"
Section 115UB. (1) Notwithstanding anything contained in
any other provisions of this Act and subject to the
provisions of this Chapter, any income accruing or arising
to, or received by, a person, being a unit holder of an
investment fund, out of investments made in the investment
fund, shall be chargeable to income-tax in the same manner
as if it were the income accruing or arising to, or received
by, such person had the investments made by the investment
fund been made directly by him.
(2) Where in any previous year, the net result of
computation of total income of the investment fund [without
giving effect to the provisions of clause (23FBA) of section
10] is a loss under any head of income and such loss cannot
be or is not wholly set-off against income under any other
head of income of the said previous year, then,-
(i) such loss shall be allowed to be carried forward and
it shall be set-off by the investment fund in accordance
with the provisions of Chapter VI; and
(ii) such loss shall be ignored for the purposes of
(3) The income paid or credited by the investment fund
shall be deemed to be of the same nature and in the same
proportion in the hands of the person referred to in
sub-section (1), as if it had been received by, or had
accrued or arisen to, the investment fund during the
previous year subject to the provisions of sub-section (2).
(4) The total income of the investment fund shall be
charged to tax-
(i) at the rate or rates as specified in the Finance Act
of the relevant year, where such fund is a company or a
(ii) at maximum marginal rate in any other case.
(5) The provisions of Chapter XII-D or Chapter XII-E
shall not apply to the income paid by an investment fund
under this Chapter.
(6) The income accruing or arising to, or received by,
the investment fund, during a previous year, if not paid or
credited to the person referred to in sub-section (1), shall
subject to the provisions of sub-section (2), be deemed to
have been credited to the account of the said person on the
last day of the previous year in the same proportion in
which such person would have been entitled to receive the
income had it been paid in the previous year.
(7) The person responsible for crediting or making
payment of the income on behalf of an investment fund and
the investment fund shall furnish, within such time as may
be prescribed, to the person who is liable to tax in respect
of such income and to the prescribed income-tax authority, a
statement in the prescribed form and verified in such
manner, giving details of the nature of the income paid or
credited during the previous year and such other relevant
details, as may be prescribed.
Explanation 1.-For the purposes of this Chapter,-
(a) "investment fund" means any fund established or
incorporated in India in the form of a trust or a company or
a limited liability partnership or a body corporate which
has been granted a certificate of registration as a Category
I or a Category II Alternative Investment Fund and is
regulated under the Securities and Exchange Board of India
(Alternative Investment Fund) Regulations, 2012, made under
the Securities and Exchange Board of India Act, 1992 (15 of
(b) "trust" means a trust established under the Indian
Trusts Act, 1882 (2 of 1882) or under any other law for the
time being in force;
(c) "unit" means beneficial interest of an investor in
the investment fund or a scheme of the investment fund and
shall include shares or partnership interests.
Explanation 2.-For the removal of doubts, it is hereby
declared that any income which has been included in total
income of the person referred to in sub-section (1) in a
previous year, on account of it having accrued or arisen in
the said previous year, shall not be included in the total
income of such person in the previous year in which such
income is actually paid to him by the investment fund.