Chapter V - Income of Other Persons Included in Total Income of Assessee
Section 98
Section 98: meaning of "transfer" and "revocable transfer"
Section 98 defines two terms that are central to the clubbing rules in Sections 96 and 97: what counts as a "transfer", and when a transfer is treated as "revocable."
On this page
Need advice on Section 98?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
For the purposes of sections 96 and 97, and this section,-- (a) "transfer" includes any settlement, trust, covenant, agreement or arrangement; (b) a transfer shall be deemed to be revocable, if-- (i) it contains any provision for the direct or indirect re-transfer of the whole or any part of the income or assets to the transferor; or (ii) it, in any way, gives the transferor a right to re-assume power directly or indirectly over the whole or any part of the income or assets.
Introduction
Section 98 gives broad meanings to transfer and revocable transfer for the income-clubbing rules in Sections 96 and 97. A right to recover income or assets, even indirectly, can make an arrangement revocable despite its label.
Key takeaways
Broad transfer definition
A settlement, trust, covenant, agreement or arrangement can be a transfer for sections 96 and 97.
Revocability tests
A return of income or assets to the transferor, or a right to reassume power over them, brings the transfer within this definition.
What Section 98 says
For the purposes of Sections 96 and 97 (and this section itself), "transfer" includes any settlement, trust, covenant, agreement or arrangement.
A transfer is deemed to be revocable if it contains any provision for the direct or indirect re-transfer of the whole or any part of the income or assets to the transferor, or if it in any way gives the transferor a right to re-assume power, directly or indirectly, over the whole or any part of the income or assets.
When this provision applies
Review the operative terms of the whole arrangement, including amendments and connected agreements. A title such as “irrevocable trust” does not settle whether a clause permits re-transfer or re-assumption of power. Section 98 expressly covers indirect rights and only part of the income or assets.
Keep the two charging situations distinct. Section 96 addresses transfer of income without the underlying assets, whether revocable or not. Section 97 addresses a revocable asset transfer, with its own exception and timing provisions. Section 98 supplies definitions used in that analysis.
Limits and procedural safeguards
The definition does not require the transferor actually to exercise a reserved right before its existence becomes relevant. Identify the provision or right in the arrangement, then apply the charging and timing rules rather than looking only at money already returned.
Section 97(2) has lifetime and no-direct-or-indirect-benefit conditions, while subsection (3) addresses when the power to revoke arises. A conclusion that an arrangement meets a Section 98 description does not justify skipping those separate requirements.
Step-by-step review
1. Identify the transferor, transferee, income stream and underlying asset.
2. Read all documents for re-transfer provisions or rights to re-assume power, including indirect and partial rights.
3. Determine whether the facts require Section 96 or Section 97 analysis.
4. Apply the relevant charging, exception and timing conditions and retain a reasoned note with the arrangement documents.
Hypothetical example
Hypothetical illustration: a settlement is labelled irrevocable, but a clause allows the settlor to require part of the investment income to be returned. That clause engages Section 98’s re-transfer test despite the label. The tax result must then be analysed under the relevant charging provision, including any applicable Section 97 conditions.
Records to prepare
Executed settlement or transfer document, amendments and connected agreements.
A clause-by-clause record of reserved rights, benefits and dates when powers arise.
Income and asset ownership records supporting the Section 96 or 97 analysis.
Official amended Act source
Practical checklist
Do
- Read the settlement, trust, covenant or agreement for re-transfer and retained-power clauses.
- Check indirect rights as well as an explicit revocation clause.
- Executed settlement or transfer document, amendments and connected agreements.
- A clause-by-clause record of reserved rights, benefits and dates when powers arise.
- Income and asset ownership records supporting the Section 96 or 97 analysis.
Avoid
- Do not rely on a document title such as 'irrevocable' when its terms permit recovery.
- Do not treat Section 98 as a separate tax charge; apply its definitions with Sections 96–97.
Glossary
- Transfer
- A broad term here that includes settlement, trust, covenant, agreement or arrangement.
- Revocable transfer
- A transfer allowing direct or indirect re-transfer or re-assumption of power over income or assets.
Frequently asked questions
Does "transfer" under this section only mean a sale?
No - it is defined broadly to include any settlement, trust, covenant, agreement or arrangement, not just a sale or conveyance.
What makes a transfer "revocable" under Section 98?
A transfer is revocable if it lets the transferor get back, directly or indirectly, the whole or part of the income or assets, or gives the transferor a right to reassume power over the whole or part of the income or assets.
Can indirect rights make a transfer revocable?
Yes. Section 98(b) expressly includes indirect re-transfer of income or assets and indirect reassumption of power by the transferor.
Must the transferor actually exercise the reserved power before I consider Section 98?
The definition examines the provision for re-transfer or the right to re-assume power. Apply the separate charging and timing rules to determine the tax consequence.
Does Section 98 replace the exception in Section 97?
No. The definition and Section 97’s own exception and timing provisions must be read together.
Need help applying this provision to your situation?
Get clarity on clubbing of income rules from our tax teamLast updated 10 October 2026