Income Tax - Clubbing of Income

Section 62 and 63 of Income Tax Act 1961: Irrevocable and Revocable Transfers

Sections 62 and 63 of the Income Tax Act, 1961 dealt with transfers that were irrevocable for a specified period and defined when a transfer was treated as revocable. From 1 April 2026, the corresponding current provisions are principally contained in Sections 97 and 98 of the Income-tax Act, 2025.

Updated: 28 September 2026 | Historical provisions of the Income Tax Act, 1961 with current-law cross-reference

Current-law note: The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the Income Tax Act, 1961, subject to transitional and savings provisions. The 1961 Act continues to govern tax years and proceedings to which the savings provisions apply. For Tax Year 2026-27 onwards, see Sections 97 and 98 of the Income-tax Act, 2025.

In simple terms: under the 1961 Act, income from a revocable transfer was generally clubbed with the transferor's income under Section 61. Section 62 created an exception for specified irrevocable transfers where the transferor derived no direct or indirect benefit. Section 63 explained what counted as a "transfer" and when a transfer was "revocable".

Section 62: Transfer irrevocable for a specified period

Section 62 operated as an exception to the clubbing rule in Section 61. It protected income arising under certain transfers from immediate clubbing in the hands of the transferor, provided the statutory conditions were satisfied.

Section 62(1) - Conditions for the exception

The Section 61 rule did not apply where the income arose by virtue of:

a transfer by way of trust that was not revocable during the lifetime of the beneficiary; or, for another kind of transfer, a transfer that was not revocable during the lifetime of the transferee; or
a transfer made before 1 April 1961 that was not revocable for a period exceeding six years.

The exception was subject to an important condition: the transferor must not derive any direct or indirect benefit from the income.

What did "irrevocable" mean for Section 62?

For this provision, the practical question was whether the transferor retained a legally effective route to get the income or assets back, or to re-assume power over them. Section 63 supplied the statutory test for deciding whether a transfer was revocable.

Section 62(2) - Tax when the power to revoke arises

Even where the Section 62(1) exception applied, the protection was not permanent if a power to revoke later arose. From that point, income arising by virtue of the transfer became chargeable as the income of the transferor and was included in the transferor's total income.

Section 63: Meaning of transfer and revocable transfer

Section 63 contained definitions used for Sections 60, 61 and 62 of the 1961 Act.

When was a transfer deemed revocable?

A transfer was deemed revocable if it:

contained a provision for the direct or indirect re-transfer of the whole or any part of the income or assets to the transferor; or
gave the transferor, in any manner, a right to re-assume power directly or indirectly over the whole or any part of the income or assets.

Meaning of transfer

For these clubbing provisions, "transfer" was deliberately broad and included any settlement, trust, covenant, agreement or arrangement.

Current position under the Income-tax Act, 2025

For Tax Year 2026-27 onwards, the corresponding rules are reorganised in the Income-tax Act, 2025. Section 97 deals with chargeability of income from revocable transfers and the exception for qualifying irrevocable transfers. Section 98 defines "transfer" and "revocable transfer".

One notable simplification is that the old Section 62(1)(ii) rule for certain pre-1 April 1961 transfers is not carried into the operative exception in Section 97(2). The current provision focuses on transfers that remain irrevocable during the lifetime of the beneficiary or transferee and on the requirement that the transferor derives no direct or indirect benefit from the income.

How Sections 61, 62 and 63 worked together under the 1961 Act

Section 61 was the charging or clubbing rule for income arising from a revocable transfer of assets. Section 62 carved out specified irrevocable transfers from that rule, subject to conditions. Section 63 supplied the definitions needed to determine whether the arrangement was a transfer and whether it was revocable.

Practical points

The wording of the trust deed, settlement, agreement or arrangement is important because a direct or indirect re-transfer clause may make the transfer revocable.
A retained right to re-assume power over income or assets can also trigger the revocable-transfer rule.
Under the old Section 62 exception, the absence of direct or indirect benefit to the transferor was a statutory condition.
For transactions and tax years from 1 April 2026, the current Act should be checked first; the 1961 Act remains relevant where the transitional provisions preserve its application.

Related provisions

For the surrounding clubbing provisions, see the page on Sections 59, 60 and 61 of the Income Tax Act, 1961. You may also continue to Section 64 - clubbing of income of spouse, minor child and others.

Note: This page explains the statutory provisions for general legal information. The applicable provision depends on the relevant tax year, the terms of the instrument and the transitional rules.