Section 308 of the Income-tax Act, 2025

Section 308 — Charge of tax in case of oral trust. Successor to s.164A of the 1961 Act.

Where this section sits

Section 308 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.

← Section 307 · Section 309 →

What this section does

Sub-section (1) charges tax at the maximum marginal rate, notwithstanding any other provision of the Act, on income that a trustee receives or is entitled to receive on behalf of or for the benefit of any person under an oral trust. Sub-section (2) gives "oral trust" the meaning assigned to it in section 303(3).

Why it is there

An oral trust leaves no instrument identifying the beneficiaries or their shares, so the ordinary machinery for taxing a trustee in a representative capacity has nothing to work with. Charging the whole income at the maximum marginal rate removes any advantage in leaving the trust undocumented.

Who it applies to

A trustee who receives or is entitled to receive income on behalf of or for the benefit of any person under an oral trust
A person for whose benefit income is received under an oral trust

The figures, and what each one turns on

Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.

What	Figure	The condition on it	Where
Rate of tax on income received under an oral trust	The maximum marginal rate	Applies irrespective of anything contained in any other provision of the Act, to income a trustee receives or is entitled to receive under an oral trust as defined in section 303(3)	Sub-section (1)

What this means in practice

The charge does not depend on actual receipt: the words are "receives or is entitled to receive". Because sub-section (1) opens with an override, no rate or benefit elsewhere in the Act displaces the maximum marginal rate for this income. Everything therefore turns on whether the arrangement is an oral trust within section 303(3).

An example

Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.

A trustee holds property under an arrangement with no written instrument and becomes entitled during the tax year to Rs. 12 lakh of income for a beneficiary. If it is an oral trust as defined in section 303(3), the whole Rs. 12 lakh is taxed at the maximum marginal rate, and the beneficiary's own slab position makes no difference.

Where you meet this section

You meet this section in the assessment of a trustee in his representative capacity, where the Assessing Officer applies the maximum marginal rate on the footing that the trust is an oral trust. Nothing is separately filed under it.

The words themselves

irrespective of anything contained in any other provision of this Act, tax shall be charged on such income at the maximum marginal rate

Section 308(1), Income-tax Act, 2025.

What people get wrong

Applying the beneficiary's slab rate. Sub-section (1) overrides other provisions and charges the maximum marginal rate.
Assuming the charge needs actual receipt. It applies where the trustee receives or is entitled to receive the income.
Deciding for oneself what an oral trust is. Sub-section (2) adopts the meaning in section 303(3).

What this replaced

The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.

164A - Charge of tax in case of oral trust

See the full 1961 to 2025 concordance.

Read with

Section 303

What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.