Simplifying Tax for C.A's and Taxpayers
De-jargoning “Pass through Income” for Schedule PTI in Income Tax Return

De-jargoning “Pass through Income” for Schedule PTI in Income Tax Return

Many of you must have noticed while filing income tax return (ITR) for the financial year 2015-16 that now ITR includes some new sections. One such section is “Schedule PTI”. Let us discuss the same.

  • What is PTI Schedule?

It is a newly inserted section in all income tax return forms for Financial Year 2015-16 except ITR-1 where an assessee has to disclose details of any pass-through incomes (PTI) that he has earned during the relevant financial year from a business trust or investment funds such as venture capital funds or real estate investment trusts.

The schedule intends to capture details of income from different sources under the pass-through mechanism received by investors.

  • What is Pass-through Income?

Pass-through income is income that has not been taxed at source or its origin and is passed on to the actual recipient of the income, without any taxation.

Certain incomes are being given ‘pass through’ status, which broadly implies that the income will be taxed in the hands of the investors rather than that of the fund itself.

For instance, “Sections 115 UA and 115 UB of the income-tax Act provide that distribution of income by a business trust or investment fund to its investors (unit holders) shall be paid to them without deduction of tax. Income distributed by such funds or trusts is taxable directly in the hands of investors and not in the hands of the funds or trusts.”

  • What is the motive behind introducing the PTI Schedule?

With the insertion of Schedule PTI in the ITR forms, the tax authority will be able to reconcile the data obtained in PTI Schedules as well as incomes distributions reported by funds and trusts and track defaulters who try to evade paying taxes on such pass-through incomes.

  • What information should be kept handy for filling PTI Schedule?

Details that need to be disclosed include:

  1. Name of the business trust or investment fund,
  2. Its Permanent Account Number (PAN),
  3. Income head, the amount of income and TDS, if any.

Post in your queries if any.


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