Income Tax Act 2025: Section 96 for Tax Year 2026-27

Income from a transferred source, without asset transfer, is taxed as the transferor’s income, regardless of revocability or timing.

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Transfer of income without transfer of assets

[Section-96 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

All income arising to any person by virtue of 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.

FAQs on Section 96 of Income Tax Act 2025

What is Section 96 of the Income Tax Act, 2025 about?
Section 96 deals with cases where income is transferred without transferring the underlying assets.

From when is Section 96 applicable?
It is applicable from 1st April, 2026.

What happens if income is transferred without transferring the asset?
The income shall be chargeable to tax in the hands of the transferor and included in his total income.

Is it relevant whether the transfer of income is revocable or irrevocable?
No, it does not matter whether the transfer is revocable or irrevocable.

Does it matter if the transfer occurred before the Income Tax Act, 2025 commenced?
No, even transfers made before the commencement of this Act are covered.

Who will be taxed under Section 96?
The transferor, i.e., the person who transferred the income but not the asset, will be taxed.

Does Section 96 apply to all types of assets?
Yes, it applies where the income arises from any asset without the asset itself being transferred.

If the asset is later transferred, will Section 96 still apply?
Section 96 specifically covers cases where there is no transfer of the asset; if the asset is transferred, this section would not apply.

Is income from revocable transfers treated differently under Section 96?
No, revocable and irrevocable transfers are treated the same under this section.

What is the main purpose of Section 96?
The main purpose is to prevent tax avoidance by transferring income without transferring ownership of the source asset.

Can Section 96 apply to gifts of income?
Yes, if the gift only transfers income and not the asset itself, Section 96 can apply.

Will both the transferor and transferee be taxed on the same income?
No, only the transferor’s total income will include the transferred income under this section.

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