Transfer of Income Without Transfer of Asset [Section 60]

Table of Contents

Concept:

Section 60applies when a person transfers only the right to receive income from an asset without transferring ownership of the asset itself.
In such cases, the income continues to be taxable in the hands of the original owner (transferor).

No Transfer of Ownership:The asset itself remains with the transferor.
Only Income Rights Transferred:The transferee gets the right to receive income (e.g., rent, interest, dividends).
Tax Liability Remains with Transferor:Even if the income is received by another person, it is taxed in the hands of the transferor.

1. Gifting Rent Income but Keeping Property Ownership

A owns a house propertybut transfers the rental income to his son without transferring the property title.
Tax Treatment:
- The rental income will still be taxable in Mr. A’s hands, even though his son receives it.

2. Assigning Interest Income While Retaining Fixed Deposit

B has a fixed deposit (FD) in a bankbut assigns the interest income to her daughter.
Tax Treatment:
- The interest income will be taxable in Mrs. B’s hands, not her daughter’s.

3. Transferring Dividend Rights but Keeping Shares

C holds shares of XYZ Ltd.but transfers the right to receive dividends to his brother.
Tax Treatment:
- Dividends will be taxable in Mr. C’s hands, not his brother’s.

Section 60 does not apply if:
- The asset itself is transferred(then normal clubbing rules under Sections 61-65 apply).
- The transfer is for adequate consideration(e.g., sale at market value).

To prevent tax avoidanceby artificially diverting income while retaining asset ownership.
Ensures that income is taxed in the hands of the person who controls the asset, not just the one receiving the income.

✅ If only income rights are transferred (not the asset), income is taxed in the transferor’s hands.

✅ Applies to rent, interest, dividends, etc., where ownership remains unchanged.

✅ Different from revocable/irrevocable transfers (covered under Sections 61 & 62).