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TMI BlogPrevention of tax avoidance strategies "transfer of income without a corresponding transfer of the asset" in Clause 96 of the Income Tax Bill, 2025 Vs. Section 60 of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income. The core principle underlying these provisions is the prevention of tax avoidance strategies where individuals might attempt to transfer income to another person without transferring the underlying asset, thereby potentially reducing their tax liability. This commentary will explore the legislative intent, analyze the provisions in detail, and compare the two statutory texts to understand their implications and potential areas for reform. Objective and Purpose The primary objective of both Clause 96 and Section 60 is to ensure that income cannot be shifted from one taxpayer to another without transferring the asset that generates such income. This provision targets arrangements where the transferor retains control over the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is the absence of asset transfer, which is the basis for including the income in the transferor's taxable income. Section 60 of the Income-tax Act, 1961 Section 60 mirrors the language and intent of Clause 96, reinforcing the principle that income should not be separated from its source asset for tax purposes. This section has been a part of the Indian tax landscape for decades, serving as a deterrent against tax avoidance through income transfer. Key elements of Section 60: Comprehensive Scope: - Similar to Clause 96, it covers both revocable and irrevocable transfers, ensuring that all forms of transfer arrangements are addressed. Inclusion in Transferor's Income: - The income arising from such transfers is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is accompanied by a corresponding asset transfer, failing which the income will be taxed in their hands. This requirement may necessitate additional documentation and record-keeping to substantiate the transfer of assets. For tax authorities, these provisions provide a clear basis for challenging arrangements that appear to be structured to avoid tax through the separation of income from assets. The clarity in the statutory language aids in the enforcement of these provisions and supports the broader objective of preventing tax avoidance. Conclusion Clause 96 of the Income Tax Bill, 2025, and Section 60 of the Income-tax Act, 1961, serve as critical components of India's tax framework, aimed at preventing the artificial separation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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