Transfer of income without transfer of assets: Old Section 60 is now Section 96

At first glance, transferring income from an asset to a family member may seem like a simple way to reduce tax liability. However, taxability depends on who owns the asset that generates the income, not on who ultimately receives the money.

 

Old law: Section 60 Income Tax Act, 1961

New law: Section 96 Income Tax Act, 2025 which is effective from 1 April 2026 and applicable from the financial year 2026-27.

 

What the Section Says :

Section 60 which's now Section 96 is very clear: if you transfer only the income from an asset, not the asset itself that income is still taxed in your hands, not the person who receives it. If only the income is transferred while ownership of the asset remains with the transferor, the income continues to be taxable in the hands of the transferor. Long as you own the asset that generates the income you are responsible for the tax.

This is the main rule about combining incomes. The law is concerned with who owns the asset that produces the income, not who receives the money.

 

What Actually Changed :

The principle remains unchanged. This is a change in the section number, not a new rule. The old rule from the 1961 Act has been carried forward to the 2025 Act with the main point, same scope and same intention. What changed is:

• Section number: it changed from 60 to 96
• Placement: In the Act this section is part of a group of sections (Sections 96-100) that replaces the old scattered Sections 60-65
• Drafting Language: the language has been simplified and restructured to make it easier to read which is consistent with the new Acts approach of using simpler language

If you have been filing tax returns referencing "Section 60" for years you will now cite "Section 96”. Same rule, same result different number.

 

Let’s understand this with an Example:

Old position (Section 60, applicable up to AY 2025-26):

Mr. Rane owns a flat in Pune and earns ?25,000 per month in rent. To reduce his tax he tells the tenant to deposit the rent directly into his wifes bank account. He does not transfer the itself just the right to receive the rent.

Result: the ?3,00,000 annual rent is still taxed as Mr. Ranes income from house property even though his wife receives the money. The fact that the rent is credited to the wife’s bank account does not change the tax liability.

New position (Section 96, applicable from AY 2026-27):

Same facts, same flat same rent. Mr. Rane makes the arrangement in the financial year 2026-27. The result is the same: 3,00,000 is taxed in Mr. Ranes hands under Section 96 because he did not transfer the asset, the income.

The only difference between the two situations is the section number cited in the computation sheet and any tax return disclosure.

 

Why This Matters for Filing :

• No opportunity for tax planning.
  Some people ask if the new Act changed the rules to prevent tax avoidance. It did not. Section 96 is a continuation of Section 60 not a new provision with new loopholes.
• Documentation is still important.
  Whether a transfer is of the asset. Just the income is a question of fact and this is where genuine transfers, like an actual sale of the property can get mixed up due to poor paperwork. Documents like deeds, sale agreements and mutation records need to show the transfer of the asset not just the income.
• This section interacts with Sections 97-99 (new),
  which were formerly Sections 61 62 and 64. If the arrangement involves a transfer of the asset itself not the income that falls under Section 97 not Section 96. Using the section is important for how you prepare your working papers and explain the addition to a client.
• Tax return reporting stays the same in principle.
  Income that is combined under this section still needs to be disclosed in the schedule once the new tax return forms for the financial year 2026-27 are notified, because individuals, with combined income need to file more detailed tax returns.

 

Bottom Line :

Section 60 did not disappear. It became Section 96. If a client asks if the new Act allows them to route income to a family member in a tax bracket without transferring the asset the answer is the same as it has always been: no. The rule was designed to prevent that in 1961 and the 2025 Act carried it forward without changing it.