Section 93 of the Income-tax Act, 1961: Transfer of Income to Non-Residents
Section 93 addresses arrangements where assets are transferred and income becomes payable to a non-resident while another person retains rights, benefits or control over that income. The corresponding provision for tax years beginning on or after 1 April 2026 is Section 174 of the Income-tax Act, 2025.
What does Section 93 cover?
Section 93 is an anti-avoidance provision in Chapter X of the Income-tax Act, 1961. It can attribute income payable to a non-resident to a person who retains the power to enjoy that income or receives a connected capital sum. The provision considers the substance of related transactions, not merely their legal form.
Its operation depends on the statutory conditions and the particular facts. An ordinary genuine overseas investment or payment is not automatically caught merely because a non-resident receives income.
Section 93 of the Income-tax Act, 1961: Subsection-wise explanation
Section 93(1)(a): Power to enjoy non-resident income
Where a transfer of assets, alone or with associated operations, causes income to become payable to a non-resident, income may be deemed to belong to a person who has acquired rights enabling that person to enjoy the non-resident's income, immediately or in the future, if it would be taxable in that person's hands.
Section 93(1)(b): Receipt of a connected capital sum
Where the person receives or is entitled to receive a capital sum connected with the transfer or associated operations, the non-resident's resulting income may similarly be deemed to be that person's income. The provision can cover transfers and associated operations predating the commencement of the 1961 Act.
Section 93(2): No second inclusion
Income already taxed as deemed income under this section is not again included under this section when it is later received by that person, whether as income or otherwise.
Section 93(3): Statutory exceptions
The provision does not apply if the person demonstrates to the Assessing Officer that neither the transfer nor any associated operation had tax avoidance as a purpose, or that the transfer and all associated operations were bona fide commercial transactions not designed to avoid taxation.
Section 93 explanations: Substance and enjoyment of income
Shares or obligations representing transferred assets or accumulated income can be taken into account. A body corporate incorporated outside India is treated as non-resident for this section. Power to enjoy income includes arrangements where income benefits a person, enhances the value of assets held for that person, provides a benefit, can be obtained through appointment or revocation powers, or remains subject to that person's direct or indirect control. The substantial result and all benefits are relevant.
Definitions under Section 93(4)
Assets: Property or rights of any kind. A transfer of rights includes the creation of rights.
Associated operation: An operation by any person relating to transferred assets, assets representing them, income arising from them, or assets representing accumulated income.
Benefit: Includes a payment of any kind.
Capital sum: Includes a loan or repayment of a loan and certain other sums paid otherwise than as income without full consideration in money or money's worth.
Section 174 of the Income-tax Act, 2025
Section 174 carries forward the specific anti-avoidance rule for income transferred to non-residents in a reorganised statutory structure. It covers transfers of assets before or after the new Act's commencement, together with associated operations. The statutory tests address the right to enjoy income, receipt of connected capital sums, prevention of repeated inclusion, exceptions for qualifying commercial transactions and defined expressions.
For tax years beginning on or after 1 April 2026, read the full Section 174 rather than applying the former subsection numbering mechanically. Section 93 of the 2025 Act concerns a different subject, namely deductions from income from other sources.
Illustrative example
Suppose a person transfers income-producing assets to an overseas entity, while retaining contractual rights to direct the income or receive a connected loan funded by that income. Depending on the full arrangement and evidence, the anti-avoidance rule may attribute that income to the person notwithstanding the overseas recipient. Conversely, a demonstrably bona fide commercial transaction satisfying the statutory exception may fall outside the rule. This example is illustrative, not a determination of tax liability.
Practical documentation
Relevant records may include transfer agreements, valuation reports, ownership and beneficial-interest records, funding arrangements, loan documentation, board approvals, commercial-purpose evidence and correspondence establishing who controls or benefits from the income.
Official legislation and references
Section 93, Income-tax Act, 1961 (official text) | Section 174, Income-tax Act, 2025 (official text) | Income-tax Act, 2025 (official PDF) | Departmental section correspondence table.
Historical statutory text: Section 93 of the 1961 Act
(1) Where there is a transfer of assets by virtue or in consequence whereof, either alone or in conjunction with associated operations, any income becomes payable to a non-resident, the following provisions shall apply-
(a) where any person has, by means of any such transfer, either alone or in conjunction with associated operations, acquired any rights by virtue of which he has, within the meaning of this section, power to enjoy, whether forthwith or in the future, any income of a non-resident person which, if it were income of the first-mentioned person, would be chargeable to income-tax, that income shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this section, be deemed to be income of the first-mentioned person for all the purposes of this Act;
(b) where, whether before or after any such transfer, any such first-mentioned person receives or is entitled to receive any capital sum the payment whereof is in any way connected with the transfer or any associated operations, then any income which, by virtue or in consequence of the transfer, either alone or in conjunction with associated operations, has become the income of a non-resident shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this section, be deemed to be the income of the first-mentioned person for all the purposes of this Act.
Explanation.-The provisions of this sub-section shall apply also in relation to transfers of assets and associated operations carried out before the commencement of this Act.
(2) Where any person has been charged to income-tax on any income deemed to be his under the provisions of this section and that income is subsequently received by him, whether as income or in any other form, it shall not again be deemed to form part of his income for the purposes of this Act.
(3) The provisions of this section shall not apply if the first-mentioned person in sub-section (1) shows to the satisfaction of the Assessing Officer that-
(a) neither the transfer nor any associated operation had for its purpose or for one of its purposes the avoidance of liability to taxation; or
(b) the transfer and all associated operations were bona fide commercial transactions and were not designed for the purpose of avoiding liability to taxation.
Explanation.-For the purposes of this section,-
(a) references to assets representing any assets, income or accumulations of
income include references to shares in or obligation of any company to which, or
obligation of any other person to whom, those assets, that income or those
accumulations are or have been transferred;
(b) any body corporate incorporated outside India shall be treated as if it were a non-resident;
(c) a person shall be deemed to have power to enjoy the income of a non-resident if-
(i) the income is in fact so dealt with by any person as to be calculated at some point of time and, whether in the form of income or not, to enure for the benefit of the first-mentioned person in sub-section (1), or
(ii) the receipt or accrual of the income operates to increase the value to such first-mentioned person of any assets held by him or for his benefit, or
(iii) such first-mentioned person receives or is entitled to receive at any time any benefit provided or to be provided out of that income or out of moneys which are or will be available for the purpose by reason of the effect or successive effects of the associated operations on that income and assets which represent that income, or
(iv) such first-mentioned person has power by means of the exercise of any
power of appointment or power of revocation or otherwise to obtain for himself,
whether with or without the consent of any other person, the beneficial
enjoyment of the income, or
(v) such first-mentioned person is able, in any manner whatsoever and whether
directly or indirectly, to control the application of the income;
(d) in determining whether a person has power to enjoy income, regard shall be had to the substantial result and effect of the transfer and any associated operations, and all benefits which may at any time accrue to such person as a result of the transfer and any associated operations shall be taken into account irrespective of the nature or form of the benefits.
(4) (a) "Assets" includes property or rights of any kind and "transfer" in relation to rights includes the creation of those rights;
(b) "associated operation", in relation to any transfer, means an operation of any kind effected by any person in relation to-
(i) any of the assets transferred, or
(ii) any assets representing, whether directly or indirectly, any of the assets transferred, or
(iii) the income arising from any such assets, or
(iv) any assets representing, whether directly or indirectly, the accumulations of income arising from any such assets;
(c) "benefit" includes a payment of any kind;
(d) "capital sum" means-
(i) any sum paid or payable by way of a loan or repayment of a loan; and
(ii) any other sum paid or payable otherwise than as income, being a sum which is not paid or payable for full consideration in money or money’s worth.
This article is general legal information. Statutory provisions, notifications and case-specific facts should be checked before relying on it.