Section 164A — Charge of Tax in Case of Oral Trust
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Live but near dormant. Part C of Chapter XV. Inserted by the Finance Act, 1981.
Subject: Where income is receivable by a representative assessee under an oral trust, tax is charged on the relevant income at the maximum marginal rate.
Finance Act, 2026: No change. Chapter XV is untouched by the Finance Act, 2026; the section stands as amended up to the Finance Act, 2025.
A. SECTION COMMENTARY
1. An anti-avoidance machinery against undeclared trusts
Section 164A charges the whole of the income of an 'oral trust' at the maximum marginal rate. 'Oral trust' takes the meaning in Explanation 2 to section 160 — a trust not declared by a duly executed instrument in writing (including a valid wakf) and not deemed under Explanation 1 to be a written trust. The provision works in tandem with section 160(1)(v) and its Explanations: a trust that would otherwise be 'oral' can be brought within the ordinary regime if a signed statement of its purposes, trustees, beneficiaries and property is filed with the Assessing Officer within the prescribed time. The policy is to deter the use of undeclared, informal trusts as a device to obscure beneficial ownership and defeat the ordinary rate of charge.
2. No reported jurisprudence
In candour, section 164A is effectively a dead-letter machinery provision. Focused searching across the standard databases discloses no reported decision of the Supreme Court, a High Court or the Tribunal construing section 164A on the merits. The section is governed by its own text and by the cure in section 160(1)(v). The nearest doctrinal anchor is the discretionary-trust MMR line under section 164 (the maximum-marginal-rate concept) and the determinacy/representative-assessment principle in Nizam's Family Trust — cited as cognate only. No section 164A authority is asserted.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
164A. 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, notwithstanding anything contained in any other provision of this Act, tax shall be charged on such income at the maximum marginal rate.
Explanation.—For the purposes of this section,—
(i) ***
(ii) "oral trust" shall have the meaning assigned to it in Explanation 2 below sub-section (1) of section
160. Case where part of trust income is chargeable.
C. AUTHORITIES
Candour rule. No reported decision construes section 164A on the merits. The provision operates on its own text and on the cure in section 160(1)(v); the cognate authorities are the section 164 MMR line.
Cluster A — Cognate authority
Cited as cognate only: the section 164 maximum-marginal-rate authorities (Marsons Beneficiary Trust 188 ITR 224 Bom; Deepak Family Trust SB; CWT v. Nizam's Family Trust 108 ITR 555 SC), set out under section 164.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; three asterisks (***) denote words or a provision omitted by amendment and retained only to mark the omission. The Finance Act, 2026 amends no section of Chapter XV of the Income-tax Act, 1961 (its Part-A amendments touch ss.92CA, 139, 140B, 144B, 144C, 147A, 148, 150, 153, 153B, 220, 222, 234, 245, 245MA, 254 and 270A-276 only). Citations are stated as reported; orders of the Tribunal and High Courts are flagged as such. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.
CHAPTER XV — LIABILITY IN SPECIAL CASES
Section 164A — Charge of Tax in Case of Oral Trust
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Live but near dormant. Part C of Chapter XV. Inserted by the Finance Act, 1981.
Subject: Where income is receivable by a representative assessee under an oral trust, tax is charged on the relevant income at the maximum marginal rate.
Finance Act, 2026: No change. Chapter XV is untouched by the Finance Act, 2026; the section stands as amended up to the Finance Act, 2025.
A. SECTION COMMENTARY
1. An anti-avoidance machinery against undeclared trusts
Section 164A charges the whole of the income of an 'oral trust' at the maximum marginal rate. 'Oral trust' takes the meaning in Explanation 2 to section 160 — a trust not declared by a duly executed instrument in writing (including a valid wakf) and not deemed under Explanation 1 to be a written trust. The provision works in tandem with section 160(1)(v) and its Explanations: a trust that would otherwise be 'oral' can be brought within the ordinary regime if a signed statement of its purposes, trustees, beneficiaries and property is filed with the Assessing Officer within the prescribed time. The policy is to deter the use of undeclared, informal trusts as a device to obscure beneficial ownership and defeat the ordinary rate of charge.
2. No reported jurisprudence
In candour, section 164A is effectively a dead-letter machinery provision. Focused searching across the standard databases discloses no reported decision of the Supreme Court, a High Court or the Tribunal construing section 164A on the merits. The section is governed by its own text and by the cure in section 160(1)(v). The nearest doctrinal anchor is the discretionary-trust MMR line under section 164 (the maximum-marginal-rate concept) and the determinacy/representative-assessment principle in Nizam's Family Trust — cited as cognate only. No section 164A authority is asserted.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
164A. 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, notwithstanding anything contained in any other provision of this Act, tax shall be charged on such income at the maximum marginal rate.
Explanation.—For the purposes of this section,—
(i) ***
(ii) "oral trust" shall have the meaning assigned to it in Explanation 2 below sub-section (1) of section
160. Case where part of trust income is chargeable.
C. AUTHORITIES
Candour rule. No reported decision construes section 164A on the merits. The provision operates on its own text and on the cure in section 160(1)(v); the cognate authorities are the section 164 MMR line.
Cluster A — Cognate authority
Cited as cognate only: the section 164 maximum-marginal-rate authorities (Marsons Beneficiary Trust 188 ITR 224 Bom; Deepak Family Trust SB; CWT v. Nizam's Family Trust 108 ITR 555 SC), set out under section 164.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; three asterisks (***) denote words or a provision omitted by amendment and retained only to mark the omission. The Finance Act, 2026 amends no section of Chapter XV of the Income-tax Act, 1961 (its Part-A amendments touch ss.92CA, 139, 140B, 144B, 144C, 147A, 148, 150, 153, 153B, 220, 222, 234, 245, 245MA, 254 and 270A-276 only). Citations are stated as reported; orders of the Tribunal and High Courts are flagged as such. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.