To get a nested tree in Drupal 7

gistfile1.php

<?php
function taxonomy_get_nested_tree($terms = array(), $parent = 0, $parents_index = array(), $max_depth = NULL, $depth = 0) {
  foreach ($terms as $term) {
    foreach ($term->parents as $term_parent) {
      if ($term_parent == $parent) {
        $return[$term->tid] = $term;
      }
      else {
        $parents_index[$term_parent][$term->tid] = $term;
      }
    }
  }

  foreach ($return as &$term) {
    if (isset($parents_index[$term->tid]) && (is_null($max_depth) || $depth < $max_depth)) {
      $term->children = taxonomy_get_nested_tree($parents_index[$term->tid], $term->tid, $parents_index, $max_depth, $depth + 1);
    }
  }
  return $return;
}