131463191

Under the Income-tax Act, certain categories of income are taxed at the Maximum Marginal Rate (MMR) rather than the normal slab rates or other rates otherwise applicable to the assessee. The concept was introduced as an anti-avoidance measure to prevent high-i... Under the Income-tax Act, certain categories of income are taxed at the Maximum Marginal Rate (MMR) rather than the normal slab rates or other rates otherwise applicable to the assessee. The concept was introduced as an anti-avoidance measure to prevent high-income taxpayers from reducing their tax liability by splitting income among multiple entities, such as private trusts, Associations of Persons (AOPs), or Bodies of Individuals (BOIs), that could otherwise benefit from lower tax rates. By taxing such income at the MMR, the Act seeks to maintain tax neutrality and curb tax avoidance, particularly where the beneficiaries' or members' shares are indeterminate or where the legislature considers taxation at the highest rate appropriate. These provisions apply to specific entities and situations, including certain trusts, AOPs/BOIs, business trusts, Alternative Investment Funds, and registered NPOs. The following table summarises the key provisions under which income is chargeable to tax at MMR. Section Description 223 of the ITA 2025 (115UA of the ITA 1961) Income of a business trust [except capital gain covered under Section 196, 197 and 198 of the ITA 2025 (corresponding to Section 111A, 112 and 112A of the ITA 1961)] is taxable at MMR. 224 of the ITA 2025 (115UB of the ITA 1961) Business income of Category-I or Category-II Alternative Investment Fund (AIF), not registered as a Company or Firm, is taxable at MMR. 307 of the ITA 2025 (164 of the ITA 1961) Income of a Private Discretionary Trust is taxed at MMR if the shares of the beneficiary are indeterminate. 308 of the ITA 2025 (164A of the ITA 1961) Income of an oral trust is taxed at MMR. 309 of the ITA 2025 (167B of the ITA 1961) Income of AOP or BOI if shares of members are indeterminate or unknown. Income of AOP or BOI if shares of members are determined, and the total income of any member (excluding his share from AOP or BOI) exceeds the basic exemption limit. 352 of the ITA 2025 (115TD of the ITA 1961) Accreted income of an NPO registered under Chapter XVII-B of the ITA 2025 (corresponding to Section 12AA or 12AB of the ITA 1961) shall be taxable at MMR if such NPO converts into, merges with or transfers any of its assets upon dissolution to a non-charitable organisation. Note: Under the ITA 1961, Section 161 provides that profits and gains from a business of a private trust are taxable at MMR, except where the trust is declared by will exclusively for the benefit of any relative dependent on him for support and maintenance, and is the only such trust so declared by him. This provision is no longer available under the ITA 2025.Definition of MMRSection 2(70) of the ITA 2025 (corresponding to Section 2(29C) of