Chapter XVII - Special Provisions Relating to Certain Persons
Section 308
Section 308: charge of tax in the case of an oral trust
Section 308 charges income received or receivable by a trustee for another person under an oral trust at the maximum marginal rate. First apply Section 303(3)’s definition, including the Section 303(2) rule that can deem a qualifying trust to be declared by a duly executed written instrument.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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 this Act, tax shall be charged on such income at the maximum marginal rate.
(2) For the purposes of this section, “oral trust” shall have the meaning assigned to it in section 303(3).
Introduction
A trustee receiving income under an oral trust is taxed on that income at the maximum marginal rate under section 308.
The meaning of oral trust comes from section 303(3), including its rule on whether a trust is treated as written.
Key takeaways
Oral-trust charge
Income received by a trustee for beneficiaries under an oral trust is charged at the maximum marginal rate.
Definition is cross-referenced
Whether a trust is an oral trust is determined under the definition in section 303(3).
Charge after identifying an oral trust
Where a trustee receives or is entitled to receive any income on behalf or for the benefit of any person under an oral trust, tax is charged on that income at the maximum marginal rate - irrespective of anything contained in any other provision of the Act.
Meaning of "oral trust"
"Oral trust" for the purposes of Section 308 has the meaning assigned to it in section 303(3) - broadly, a trust not declared by a duly executed instrument in writing (including a valid wakf deed) and not deemed under section 303(2) to be one declared by a duly executed instrument in writing.
When this provision applies
Determine whether the trust falls within Section 303(3), including whether Section 303(2) deems it to be declared by a duly executed written instrument. The absence of an original deed alone is not a complete classification exercise.
Then identify income the trustee receives or is entitled to receive on behalf of or for the benefit of a person under that oral trust. Section 308 charges that income at the maximum marginal rate.
Limits and procedural safeguards
A written statement relied on under Section 303(2) must satisfy its signature, particulars, forwarding and timing requirements. Preparing a document at any later date is not, by itself, proof that those conditions were met.
Section 308 does not print a fixed numerical percentage. Determine the applicable maximum marginal rate under the Act’s definition and relevant year’s rate provisions; do not substitute an ordinary beneficiary slab merely because the beneficiary’s own income is low.
Step-by-step review
1. Identify the trust’s declaration date and any duly executed written instrument.
2. If relying on Section 303(2), verify the signed statement, required particulars and evidence of forwarding within the stated time.
3. Classify the trust under Section 303(3) and identify the income received or receivable by its trustee.
4. If Section 308 applies, compute tax using the applicable maximum marginal rate and document the basis.
Hypothetical example
Hypothetical illustration: a trust has no original written deed, but its trustee relies on a signed statement forwarded to the Assessing Officer. Classification requires checking all Section 303(2) conditions, including the specified time limit. The statement’s existence alone neither establishes compliance nor permits ignoring the deeming provision.
Records to prepare
Declaration-date evidence and any trust instrument.
The signed statement, required trust particulars and forwarding evidence where Section 303(2) is relied on.
Trustee income records and the applicable maximum-marginal-rate computation.
Official amended Act source
Step-by-step flow for applying Section 308
- 1
Does a trustee receive, or is entitled to receive, income on behalf or for the benefit of any person?
- No: Section 308 does not apply.
- Yes: Go to the next step.
- 2
Was the trust declared by a duly executed instrument in writing, including a valid wakf deed?
- Yes: It is not an oral trust; see Sections 303(1)(d) and 307.
- No: Go to the next step.
- 3
Was a signed statement of the trust forwarded to the Assessing Officer within the time in Section 303(2)?
- Yes: The trust is deemed written and is not an oral trust.
- No: It is an oral trust as defined in Section 303(3), applied by Section 308(2). Go to the next step.
- 4
Charge at the maximum marginal rate
Under Section 308(1), tax on the income is charged at the maximum marginal rate, irrespective of anything in any other provision of the Act. Section 308 does not state the rate itself.
Practical checklist
Do
- Check whether a duly executed instrument or qualifying written statement brings the trust outside the oral-trust definition.
- Keep documents supporting the trust’s formation and income received.
- Declaration-date evidence and any trust instrument.
- The signed statement, required trust particulars and forwarding evidence where Section 303(2) is relied on.
- Trustee income records and the applicable maximum-marginal-rate computation.
Avoid
- Assume a later oral explanation replaces the written-instrument test.
Illustrative example
Worked example: rent received under an unwritten trust
Hypothetical facts (illustration only, not a real taxpayer): Mr. Pillai orally declares a trust on 10 April 2026, under which his friend, as trustee, collects rent of ₹3,60,000 a year (assumed) from a shop for Mr. Pillai's two daughters. No written deed exists and no statement is ever sent to the Assessing Officer.
Trustee income
The friend receives income for the benefit of the daughters, so Section 308 is engaged.
No written instrument
There is no deed or wakf deed.
No statement
No statement was sent within three months of 10 April 2026, so the trust is not deemed written under Section 303(2).
Charge
It is an oral trust, so the ₹3,60,000 is charged at the maximum marginal rate under Section 308(1), whatever the daughters' own income.
Outcome
- The rent is charged at the maximum marginal rate in the trustee's hands.
- A timely signed statement under Section 303(2) would have kept the trust out of Section 308.
Glossary
- Deemed written trust
- A trust treated as declared by a duly executed written instrument when Section 303(2)’s conditions are met.
Frequently asked questions
Does the absence of an original deed settle the classification?
No. Check the oral-trust definition in Section 303(3), including whether Section 303(2) deems the trust to be declared by a duly executed written instrument.
Can an unwritten trust ever avoid being treated as an "oral trust"?
Yes - under section 303(2), an otherwise-unwritten trust is deemed to be a trust declared by a duly executed instrument in writing if a signed written statement covering its purpose, trustee(s), beneficiary/beneficiaries and property is forwarded to the Assessing Officer within the time limit specified there.
Does a low-income beneficiary automatically permit ordinary slab taxation under Section 308?
No. If the oral-trust provision applies, the stated charge is at the maximum marginal rate.
Is a statement prepared at any later time sufficient?
No. Verify all Section 303(2) conditions, including its forwarding and time requirements.
Need help applying this provision to your situation?
Get help with oral trust or family trust taxationLast updated 10 October 2026