“Transfer” and “revocable transfer” defined
[Section-98 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
For the purposes of sections 96 and 97, and this section,—
- (a) “transfer” includes any settlement, trust, covenant, agreement or arrangement;
- (b) a transfer shall be considered to be revocable, if––
- (i) it contains any provision for the direct or indirect re-transfer of the whole or any part of the income or assets to the transferor; or
- (ii) it, in any way, gives the transferor a right to re-assume power directly or indirectly over the whole or any part of the income or assets.
FAQs on Section 98 of Income Tax Act 2025
What does the term “transfer” include under Section 98 of the Income Tax Act, 2025?
The term “transfer” includes any settlement, trust, covenant, agreement, or arrangement.
Is the definition of “transfer” in Section 98 limited to only legal transfers?
No, it is an inclusive definition and covers various forms of arrangements, not just legal ownership transfers.
For which sections is the definition of “transfer” under Section 98 relevant?
The definition is relevant for the purposes of Sections 96, 97, and 98.
What is a “revocable transfer” under Section 98?
A revocable transfer is one that includes provisions allowing the transferor to reclaim or control income or assets, either directly or indirectly.
When is a transfer considered revocable due to a re-transfer clause?
A transfer is revocable if it contains any provision for the direct or indirect re-transfer of the whole or part of the income or assets to the transferor.
Can a transfer be revocable even if the transferor does not receive assets back, but retains control?
Yes, if the transferor retains the right to re-assume power directly or indirectly over the whole or part of the income or assets, it is still a revocable transfer.
Does indirect control or benefit to the transferor make a transfer revocable?
Yes, even indirect rights or benefits that allow the transferor to re-assume control or benefit from the income or assets render the transfer revocable.
Is there a requirement for formal documentation to consider a transfer revocable?
No, the presence of any provision—whether explicit or implicit—that gives the transferor re-transfer rights or control makes it revocable, regardless of formal documentation.
Is a revocable transfer treated differently for tax purposes under this Act?
Yes, revocable transfers generally lead to taxation in the hands of the transferor, as the income or assets are effectively not transferred permanently.
What happens if only part of the income or assets can be re-transferred to the transferor?
Even if the provision applies to only part of the income or assets, the transfer is still considered revocable under Section 98.
Is a trust always considered a revocable transfer?
Not necessarily. A trust is only considered revocable if it includes provisions for re-transfer or allows the settlor to re-assume control over the assets or income.
Can a power of attorney create a revocable transfer under Section 98?
It can, if it contains clauses allowing the original owner to regain control or re-transfer income or assets to themselves.
Are oral agreements considered for determining revocability under Section 98?
Yes, as long as there is any arrangement—written or oral—that allows re-transfer or control, the transfer may be deemed revocable.
Does Section 98 apply to all kinds of assets and income?
Yes, the definitions under Section 98 apply broadly and do not exclude any specific types of income or assets.
Is the presence of revocability assessed at the time of transfer or later?
It is assessed based on the terms and conditions existing at the time of transfer, including any provisions that allow future re-transfer or control.
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