Section 62 of the Income-tax Act, 1961: Transfer Irrevocable for a Specified Period
Section 62 provides an important exception to the rule that income arising from a revocable transfer of assets is taxable in the hands of the transferor. It applies only where the statutory conditions are satisfied.
Meaning and purpose of Section 62
Under Section 61, income arising through a revocable transfer of assets is generally included in the transferor's total income. Section 62 identifies transfers for which that rule does not apply while the prescribed safeguards continue to hold. The exemption from clubbing is conditional, not automatic.
Conditions under Section 62(1)
1. Trust not revocable during the beneficiary's lifetime
For a transfer made by way of a trust, the transfer must not be revocable during the lifetime of the beneficiary. For another form of transfer, it must not be revocable during the lifetime of the transferee.
2. Special historical category for transfers before 1 April 1961
Section 62(1)(ii) separately covers transfers made before 1 April 1961 that were not revocable for a period exceeding six years. This is a historical transitional provision; it does not establish a general six-year rule for transfers made today.
3. No direct or indirect benefit to the transferor
In either category, the transferor must not derive any direct or indirect benefit from the income. If the transferor can enjoy the income indirectly, the protection under Section 62 may fail.
Section 62(2): Tax when the power to revoke arises
Even if a transfer initially qualifies for the exception, the income arising through the transfer becomes chargeable as the transferor's income as and when the power to revoke the transfer arises. Actual exercise of that power is not required by the wording of Section 62(2). The timing and amount of income taxable must be examined with reference to the relevant period and facts.
Important legal definitions
Transferor: The person who makes the transfer of the asset or interest. Transferee: The person to whom the asset or interest is transferred. Beneficiary: The person for whose benefit a trust is created or operated.
Revocable transfer: Under Section 63, a transfer is deemed revocable where it provides for direct or indirect re-transfer of income or assets to the transferor, or gives the transferor a right to reassume power over any part of them. The definition of transfer includes a settlement, trust, covenant, agreement or arrangement.
Practical illustrations
| Situation | Likely treatment |
|---|---|
| An irrevocable trust cannot be revoked during the beneficiary's lifetime and the settlor receives no benefit from its income. | The Section 62(1) exception may apply, subject to the actual trust deed and other applicable provisions. |
| A settlement allows the settlor to reclaim the asset while the transferee is alive. | The lifetime condition may not be met; Section 61 clubbing should be considered. |
| A qualifying transfer later becomes revocable under its terms. | Section 62(2) brings income within the transferor's tax computation when the power to revoke arises. |
| A deed is described as irrevocable but indirectly returns income to the transferor. | The label alone is insufficient; the benefit condition and Section 63 definition must be examined. |
How Sections 60 to 63 work together
- Section 60: Income transferred without transferring the underlying asset remains taxable to the transferor.
- Section 61: Income arising from a revocable transfer is generally taxable to the transferor.
- Section 62: Qualifying irrevocable transfers receive a conditional exception, subject to subsequent revocability.
- Section 63: Defines transfer and revocable transfer for these rules.
Corresponding law under the Income-tax Act, 2025
Section 97 of the Income-tax Act, 2025 addresses chargeability of income from revocable transfers. Its sub-section (2) sets out the exception for qualifying transfers that cannot be revoked during the relevant lifetime and do not confer direct or indirect income benefits on the transferor. Sub-section (3) addresses taxation when the power of revocation arises. The special pre-1961 transfer category is not reproduced as a separate modern exception in Section 97.
For statutory verification, consult the Income Tax Department's Section 62 text, the Income Tax Department, and the India Code legislation repository. The Income Tax Department's section correspondence navigator identifies Section 97 as the related provision.
Frequently asked questions
Does an irrevocable trust always prevent clubbing of income?
No. The relevant lifetime restriction, absence of direct or indirect benefit, and the actual terms of the arrangement must be examined. Other tax provisions may also apply.
Is a six-year irrevocable period enough for a new transfer?
No. The six-year language in Section 62(1)(ii) relates only to transfers made before 1 April 1961.
What happens when a power to revoke first becomes available?
Section 62(2) makes income arising through that transfer taxable in the hands of the transferor when that power arises, even if it is not exercised.
Original statutory provision: Section 62
Read the full text preserved from the original webpage
62(1). The provisions of section 61 shall not apply to any income arising to any person by virtue of a transfer-
(i) by way of trust which is not revocable during the lifetime of the beneficiary, and, in the case of any other transfer, which is not revocable during the lifetime of the transferee; or
(ii) made before the 1st day of April, 1961, which is not revocable for a period exceeding six years:
Provided that the transferor derives no direct or indirect benefit from such income in either case.
62(2). Notwithstanding anything contained in sub-section (1), all income arising to any person by virtue of any such transfer shall be chargeable to income-tax as the income of the transferor as and when the power to revoke the transfer arises, and shall then be included in his total income.
Editorial note: This article is general legal information, not advice on any particular deed or trust. Verify the tax year, statutory text and transitional rules before relying on it.