Section 97 - Chargeability of income in transfer of assets
Income from a revocable asset transfer normally returns to the transferor’s tax base. A narrow exception applies where revocation is blocked for the relevant lifetime and the transferor receives no direct or indirect benefit. Once a power to revoke becomes available, the income is again included with the transferor.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Section 97 is presented using the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The general commencement date is 1 April 2026. Earlier years and saved proceedings may remain governed by the Income-tax Act, 1961 and the repeal/savings framework.
2-minute professional decode
Income from a revocable asset transfer normally returns to the transferor’s tax base. A narrow exception applies where revocation is blocked for the relevant lifetime and the transferor receives no direct or indirect benefit. Once a power to revoke becomes available, the income is again included with the transferor.
Who should test this section?
Section 97 is relevant to individuals and family structures when chargeability of income in transfer of assets; advisers should trace the relationship, transfer and beneficiary mechanics instead of relying on ownership labels alone.
Evidence to retain
For section 97, retain relationship records, transfer instruments, consideration evidence, investment/capital-account workings and the attribution calculation connected with chargeability of income in transfer of assets.
1961 Act bridge
| Legacy provision | Legacy heading | Mapping |
|---|---|---|
| 61 | Revocable transfer of assets. | Consolidated in 2025 provision |
| 62 | Transfer irrevocable for a specified period. | Consolidated in 2025 provision |
The bridge is a research aid. Legacy case law carries over only after the current wording and transition rules are matched.
Rules and forms linked to this section
No provision-specific Rule was independently mapped from the current Rules register for this section. That does not mean the wider Rules are irrelevant.
Worked application
A settlor transfers securities to a trust but reserves a right to take them back after five years. Dividend and interest income is ordinarily included with the settlor. If the trust is genuinely irrevocable throughout the beneficiary’s lifetime, the settlor has no benefit, and the statutory conditions are met, the lifetime exception may apply until a power to revoke arises.
Common mistake
Under section 97, relationship by itself is neither enough nor irrelevant: clubbing must follow the precise statutory transfer, benefit and attribution conditions for chargeability of income in transfer of assets.
Compliance approach
Identify the statutory trigger for section 97, lock the relevant tax year, reconcile the facts to the operative sub-section, preserve the evidence trail and separately test every linked Rule, Form, Schedule and exception before finalising the return position.
Numeric / timing checkpoints in the operative text
- No standalone numeric checkpoint should be inferred from the heading; read the operative text.
Related provisions
Current statutory text
Primary-source trail
- Consolidated Income-tax Act, 2025 (as amended by Finance Act, 2026) (official external source)
- Income Tax Department - Act/Rules/Forms hub (official external source)
- CBDT commencement material - Act operative from 1 April 2026 (official external source)
Source status: full Section 97 statutory text in the local source corpus; reconciled to the current consolidated Act control on 8 October 2026.