Section 96 — Transfer of income without transfer of assets

Old Act equivalent: Section 60 of IT Act 1961 Sub-part: Chapter V — Income of Other Persons Included in Total Income

Statutory Text

All income arising to any person by virtue of a transfer,—

(a) whether revocable or not, and whether effected before or after the commencement of this Act; and

(b) where there is no transfer of assets from which such income arises,

shall be chargeable to income-tax as the income of the transferor and shall be included in his total income.

This section has no sub-sections — it is a single operative provision.

None.

None.

None.

Applies to: Any person who transfers income without transferring the underlying asset
Scope: Covers both revocable and irrevocable transfers; applies to transfers before or after the Act’s commencement
Effect: Income is taxed in the hands of the transferor, not the transferee
Condition: There must be no transfer of the asset from which the income arises — only the income stream is diverted
Monetary limits: None

s097-revocable-transfer — Section 97: transfers where assets are also transferred (revocable)
s098-definitions — Section 98: definitions of “transfer” and “revocable transfer”
s099-clubbing-spouse-minor — Section 99: clubbing of spouse/minor child income
s100-liability — Section 100: liability of person whose income is clubbed

None noted from the extracted pages.

This is the broadest anti-avoidance clubbing provision: if you divert your income stream to another person but retain the asset, the income is still yours.
Classic example: a person directs his employer to pay part of salary to his spouse — the asset (employment) is not transferred, only the income is redirected. The full salary is taxable in the employee’s hands.
Both revocable and irrevocable transfers are covered — no escape by making the transfer permanent.
This section must be read with section 98 which defines “transfer” very broadly to include settlements, trusts, covenants, agreements, and arrangements.