Indian income tax law | Clubbing of income

Section 60 of the Income-tax Act, 1961: Transfer of Income Without Transfer of Assets

Section 60 prevents a person from reducing taxable income merely by assigning income from an asset to somebody else while continuing to own the underlying asset. The income remains taxable in the hands of the transferor.

Legislative update (2026): For tax years beginning on or after 1 April 2026, the corresponding provision is Section 96 of the Income-tax Act, 2025. Section 60 of the 1961 Act remains relevant for earlier years and proceedings governed by that Act. The substantive clubbing principle is retained.

Text of Section 60 under the Income-tax Act, 1961

All income arising to any person by virtue of a transfer whether revocable or not and whether effected before or after the commencement of this Act shall, where there is no transfer of the assets from which the income arises, be chargeable to income-tax as the income of the transferor and shall be included in his total income.

Source: Income Tax Department - Section 60.

Meaning and conditions of Section 60

The provision applies where an arrangement transfers the right to receive income, but the asset that produces the income is not transferred. Three questions matter:

Is there an income-producing asset? Examples include a let-out property, interest-bearing investment or other income-generating property.
Has income been assigned to another person? The arrangement may be a settlement, agreement or other transfer of the income stream.
Does the transferor retain the asset? If the asset itself has not been transferred, Section 60 attributes the income to the transferor.

The rule applies whether the income assignment is revocable or irrevocable. It is not confined to transfers among family members.

Practical example: Rent assigned without transferring the house

Suppose A owns a house and rents it for Rs. 25,000 per month. A directs the tenant to pay all rent to B but continues to own the house. The annual rent of Rs. 3,00,000 is attributed to A for income-tax purposes, subject to the applicable computation provisions, even though B receives the payments.

Fact	Tax treatment
A retains ownership of the house and assigns rent to B	Section 60 applies; rent is included in A's income.
A genuinely transfers the house as well as the right to its future income	Section 60 does not apply merely on the basis of income-only assignment; other clubbing and transfer provisions must still be checked.
A makes the income assignment irrevocable but retains the house	Section 60 can still apply because revocability is not a condition.

Section 60 concerns income transferred without transferring its source asset. Section 61 generally clubs income arising from a revocable transfer of assets. Section 62 sets out specified exceptions for certain transfers not revocable during the relevant lifetime and where the transferor derives no direct or indirect benefit. Section 63 defines the terms transfer and revocable transfer for these rules.

Under Section 63, transfer includes a settlement, trust, covenant, agreement or arrangement. A transfer is deemed revocable if it permits a direct or indirect re-transfer of income or assets to the transferor or allows the transferor to reassume power over them.

These provisions should be read together, but the exceptions applicable to certain asset transfers under Section 62 should not be assumed to exempt an income-only assignment under Section 60.

Corresponding Section 96 of the Income-tax Act, 2025

Section 96 is titled Transfer of income without transfer of assets. It provides that income arising to a person by virtue of a transfer, whether revocable or not and whether effected before or after commencement of the Act, is taxable as the transferor's income when the underlying asset has not been transferred.

The 2025 Act reorganises these rules: Section 97 addresses chargeability in cases of transferred assets, Section 98 defines transfer and revocable transfer, and Section 99 covers specified clubbing of income involving spouses, minor children and others. For a particular assessment, apply the legislation governing the relevant tax year and applicable transitional provisions.

Frequently asked questions

Can a property owner transfer rental income to a relative and avoid tax?

No. Where the owner retains the property and assigns only its rent, the income is generally included in the owner's taxable income under Section 60 or corresponding Section 96, as applicable.

Does an irrevocable assignment of income escape Section 60?

No. Section 60 expressly covers both revocable and irrevocable transfers of income when the underlying asset is not transferred.

Does Section 60 apply if the asset is actually transferred?

Section 60 specifically targets income-only transfers. A genuine transfer of the asset requires separate analysis under other relevant tax provisions, including the rules for revocable asset transfers and transfers to certain relatives.

Official legislation and guidance

This article explains the general law. The outcome in an individual case depends on the documents, ownership rights, relevant tax year and applicable statutory provisions.