Clubbing of Income in Case Transfer of Asset is Revocable in Nature

As per section 61 of the Income Tax Act, 1961 any asset those ownership is transferred but it is revocable in nature means transferor can take back his asset whenever is he/she wants then any income generating from such asset will be taxed in hands of the transferor.

Revocable transfer of asset [section 61]

Income arising to any person as a result of transfer of asset is deemed as income of the transferor if:

  1. The transfer is revocable or
  2. It contains any provision for the retransfer, directly or indirectly, of the whole or any part of the income or assets to the transferor or
  3. It gives the transferor a right to reassume power, directly or indirectly, over the whole or any part of the income or assets.

Exception to above section is that by virtue of section 62, income from the assets transferred will not be included in the income of transferor when:

  1. Transfer, if effect through trust, is not revocable during the lifetime of beneficiary
  2. In the case of any other transfer ,the same is not revocable within the lifetime of transferee
  3. The transfer was before 1 April, 1961 and the same not revocable for a period of 6 year or more

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