Sections 307-308 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Where a trustee or other representative receives income for beneficiaries whose shares are not specific, section 307 says at what rate the tax is charged, and lists the cases that get the lower rate applicable to an association of persons. Section 308 charges income received under an oral trust at the maximum marginal rate. This article reads both as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
Income received under a court-appointed arrangement or a written trust (the persons in section 303(1)(c) and (d)) is charged at the maximum marginal rate if it is not specifically receivable for any one person, or the individual shares are indeterminate or unknown. Four exceptions apply the rate applicable to an association of persons instead. Business profits under a written trust are at the maximum marginal rate, and income under an oral trust is at the maximum marginal rate.
Section 307: the charge
Sub-section (1): when the maximum marginal rate applies
The income, or any part of it, in respect of the persons mentioned in sections 303(1)(c) and (d) (court-appointed persons, and trustees of written trusts) is chargeable to tax at the maximum marginal rate if:
- (a) the income or part of it is not specifically receivable on behalf or for the benefit of any one person; or
- (b) the individual shares of the persons on whose behalf or for whose benefit it is receivable are indeterminate or unknown.
The Act does not print a figure for the maximum marginal rate in this section, and none is stated in this article.
Sub-section (2): the four exceptions
Income referred to in sub-section (1) is instead chargeable at the rate applicable to an association of persons, as if it were its total income, if:
| Clause | Condition |
|---|---|
| (a) | None of the beneficiaries has any other income chargeable under the Act exceeding the maximum amount not chargeable to tax in the case of an association of persons, or is a beneficiary under any other trust |
| (b) | The income is receivable under a trust declared by any person by will, and that trust is the only trust so declared by him |
| (c) | The income is receivable under a trust created before 1 March 1970 by a non-testamentary instrument, and the Assessing Officer is satisfied, having regard to all the circumstances existing at the relevant time, that the trust was created bona fide (i) exclusively for the benefit of the relatives of the settlor; or (ii) exclusively for the benefit of the members of the family, where the settlor is a Hindu undivided family, in circumstances where the relatives or members were mainly dependent on the settlor for their support and maintenance |
| (d) | The income is receivable by the trustees on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in that business or profession |
A trustee whose trust fits one of these four patterns should check the facts against the exact words, because each condition is specific: for example, clause (b) requires that the will-trust be the only trust so declared by the person.
Sub-sections (3) and (4): business profits under a written trust
Subject to sub-section (4), where the income of the persons mentioned in section 303(1)(d) (trustees of a written trust) consists of, or includes, profits and gains of business, tax is charged at the maximum marginal rate on that income or part of it.
Sub-section (4): where those profits are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and that trust is the only trust so declared by him, the income or part is chargeable at the rate applicable to an association of persons.
Sub-section (5): when shares are deemed unknown
For section 307:
- (a) the income or part of it is deemed not specifically receivable on behalf of or for the benefit of any one person unless the person for whom it is receivable during the tax year is expressly stated in the order of the court, the instrument of trust or the wakf deed, as the case may be, and is identifiable as such on the date of the order, instrument or deed;
- (b) the individual shares are deemed indeterminate or unknown unless they are expressly stated in the order, instrument or deed and are ascertainable as such on that date.
So the drafting of the trust instrument matters: if the beneficiary and the share are not stated and identifiable on the date of the instrument, the deemed position is "not specific" and "unknown", and sub-section (1) applies unless an exception in sub-section (2) is met.
For who the persons in section 303 are, see our article on sections 303 to 306. If you are drafting or reviewing a trust deed with tax in mind, our tax planning advisory team can help.
Section 308: oral trust
- (1) Where a trustee receives or is entitled to receive any income on behalf or for the benefit of any person under an oral trust, then, irrespective of anything contained in any other provision of the Act, tax is charged on that income at the maximum marginal rate.
- (2) "Oral trust" has the meaning assigned to it in section 303(3): a trust not declared by a duly executed instrument in writing (including a wakf deed valid under the Mussalman Wakf Validating Act, 1913) and not deemed under section 303(2) to be one so declared.
Section 308(1) opens with "irrespective of anything contained in any other provision of this Act". Section 307, by contrast, speaks of the persons in section 303(1)(c) and (d), not of the trustee of an oral trust. Whether a trust is oral turns on section 303(2): a trust for which the written statement is forwarded to the Assessing Officer within the time that sub-section allows is deemed to be a trust declared in writing.
The Act refers to the Mussalman Wakf Validating Act, 1913; read that law for its meaning.
A worked example
All names and amounts are assumed. Because the maximum marginal rate and the association of persons rate are not printed in these sections, the examples show which rate applies, not the tax.
Example 1: shares unknown. The Mehra Family Trust, a written trust, receives Rs. 6,00,000 as rent. The deed says the trustees will distribute "as they think fit among the grandchildren". No beneficiary or share is expressly stated or identifiable on the date of the deed. Under sub-section (5)(a) and (b) the income is deemed not specifically receivable for any one person and the shares are deemed indeterminate. Section 307(1) applies: the Rs. 6,00,000 is charged at the maximum marginal rate, unless an exception in sub-section (2) is met.
Example 2: will trust exception. Mr. Gopal Verma's will creates one trust, the only trust he declared, with shares not specified. Under section 307(2)(b) the income is chargeable at the rate applicable to an association of persons, as if it were the trust's total income.
Example 3: business profits. A written trust receives Rs. 8,00,000, of which Rs. 5,00,000 is rent and Rs. 3,00,000 is profit from a business carried on by the trust. The Rs. 3,00,000 is business profit within section 307(3), chargeable at the maximum marginal rate (unless sub-section (4) applies); the rent is dealt with under sub-sections (1) and (2).
Example 4: oral trust. A trustee receives Rs. 2,00,000 for a beneficiary under an oral trust. Under section 308(1) it is charged at the maximum marginal rate.
Need help with a trust's tax position?
Whether trust income is taxed at the maximum marginal rate or at the association-of-persons rate often turns on how the deed was drafted and what was stated on the date it was made. Our team can help you read a deed against these sections and plan the trust's affairs. See our tax planning advisory service.
Key takeaways
- Income received by court-appointed persons and trustees of written trusts is charged at the maximum marginal rate if it is not specifically receivable for any one person or the shares are indeterminate or unknown.
- Four exceptions in section 307(2) give the association-of-persons rate.
- Business profits received by a trustee of a written trust are at the maximum marginal rate, except for a sole will-trust for dependent relatives.
- Income is deemed not specific, and shares deemed unknown, unless expressly stated and identifiable or ascertainable on the date of the instrument.
- Income received under an oral trust is charged at the maximum marginal rate irrespective of any other provision.
- The statement in section 303(2) decides whether a trust is treated as written or oral.
Read next
- Sections 303 to 306: representative assessees and agents
- Sections 309 to 311: members' shares in an association of persons
- Sections 302 and 312: legal representatives and executors
- Chapter XVII: special provisions relating to certain persons
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.