Offshore Irrevocable Trust query (Hypothetical)

[User_4cc4ba97]

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User_4cc4ba97
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February 6, 2025 at 3:11 pm

If a UK citizen (eg: your friends father) establishes an irrevocable trust in the Isle of Man for your benefit, with a lump sum payout on your 27th birthday and no annual distributions, what are the tax implications for me in India? The trust owns a investment firm to invest its own money and you are the investment manager with a yearly fixed salary till the time you get the lumpsum.

I am an Indian citizen and tax resident but you move to the UAE and become a tax resident at 25. Given that the UAE has no personal income tax and I would no longer be an Indian tax resident at the time of receiving the lump sum, would this amount be taxable in India? Additionally, as the investment manager of the trust, are there any ongoing tax liabilities or reporting requirements in India, even though I do not receive any annual income distribution from the trust?

Do you need to disclose the trust in your Indian income tax return? Will it qualify as a “foreign asset” that needs to be reported under Schedule FA (Foreign Assets and Income) in the ITR?

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