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TMI BlogThe chargeability of income in the context of the transfer of assets with Exception in Clause 97 of Income Tax Bill, 2025 vs. section 61 & 62 of Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Bill, 2025 introduces Clause 97, which addresses the chargeability of income in the context of the transfer of assets. This clause is pivotal in determining how income generated from transferred assets is taxed, particularly when such transfers are revocable. It aims to ensure that income from certain asset transfers is taxed in the hands of the transferor, thereby preventing tax avoidance th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Transfers Sub-section (1) of Clause 97 stipulates that income arising from a revocable transfer of assets is chargeable to tax as the income of the transferor. This aligns with the principle that the person who retains control and potential benefits from the asset should bear the tax liability. The term "revocable transfer" implies that the transferor has the power to reclaim control over the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to tax in the hands of the transferor once the power to revoke the transfer arises. This clause ensures that any latent power to revoke the transfer and reclaim the asset results in the corresponding income being taxed to the transferor, maintaining the principle of taxing the person with ultimate control. Comparative Analysis with Existing Legislation Section 61 of the Income-tax Act, 1961 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n without regard to the date of transfer. Both Section 62 and Clause 97(3) include provisions that tax the transferor when the power to revoke arises, ensuring that any potential to reclaim the asset leads to the corresponding income being taxed appropriately. Practical Implications The implementation of Clause 97 will have significant implications for taxpayers and tax planners. Individuals eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more detailed conditions and exceptions, it aims to close loopholes and ensure equitable taxation. The emphasis on the transferor's control and benefit reinforces the principle of taxing individuals based on economic reality rather than mere legal form. As the Bill progresses, stakeholders must remain vigilant to ensure compliance with these provisions. Future judicial interpretations and pote ..... X X X X Extracts X X X X X X X X Extracts X X X X
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