Section 62 carves out from s. 61 — irrevocable transfers (during lifetime of beneficiary / transferee) escape clubbing. However, s. 62(2) restores clubbing if the transferor derives direct or indirect benefit. The provision balances genuine alienation against avoidance: a transfer is acceptable only if the transferor cannot re-acquire AND derives no benefit.
Historical context / FA amendment trail
Stable since 1961.
Operative consequences
• Trust transfers irrevocable during beneficiary lifetime — no clubbing.
• Non-trust transfers irrevocable during transferee lifetime — no clubbing.
• Anti-benefit rule: s. 62(2) restores clubbing if transferor benefits directly or indirectly.
Case Laws & Commentary
SECTION 62 — TRANSFER IRREVOCABLE FOR A SPECIFIED PERIOD
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position and purpose
Section 62 is the relieving provision of the revocable-transfer scheme. It carves out from the charge in s.61 those transfers that, although they may ultimately become revocable, are genuinely beyond the transferor's recall for a defined period or during a beneficiary's lifetime, AND from which the transferor derives no direct or indirect benefit. The provision recognises that a settlement which truly puts the property beyond the settlor's reach for the relevant period ought not to be treated as a sham. But the relief is conditional and temporary: the moment the power to revoke arises, s.62(2) restores the charge to the transferor. Section 62 cannot be read in isolation from s.61 (the charge) and s.63 (the definitions).
A.2 Statutory text (verbatim)
62. (1) The provisions of section 61 shall not apply to any income arising to any person by virtue of a transfer—
(i) by way of trust which is not revocable during the lifetime of the beneficiary, and, in the case of any other transfer, which is not revocable during the lifetime of the transferee; or
(ii) made before the 1st day of April, 1961, which is not revocable for a period exceeding six years :
Provided that the transferor derives no direct or indirect benefit from such income in either case.
(2) Notwithstanding anything contained in sub-section (1), all income arising to any person by virtue of any such transfer shall be chargeable to income-tax as the income of the transferor as and when the power to revoke the transfer arises, and shall then be included in his total income.
A.3 Essential ingredients
(1) A transfer falling in one of two classes — either (a) a trust not revocable during the lifetime of the beneficiary (or, for any other transfer, not revocable during the lifetime of the transferee); or (b) a transfer made before 1 April 1961 which is not revocable for a period exceeding six years.
(2) The transferor derives no direct or indirect benefit — this proviso applies to both classes and is strictly construed. Any benefit to the transferor, however indirect or contingent, defeats the exemption.
(3) Temporary nature of the relief — by s.62(2), the income becomes chargeable to the transferor as and when the power to revoke arises. The exemption holds only so long as the transfer remains genuinely irrevocable for the relevant period and confers no benefit on the transferor.
A.4 Doctrinal themes
Two themes recur: (i) the genuineness and irrevocability of the settlement — whether, on a true construction of the deed, the transferor has in fact placed the property beyond recall for the period required by s.62(1); and (ii) the 'no direct or indirect benefit' condition — the courts have read this expansively, so that reversionary, contingent or collateral benefits to the settlor are enough to forfeit the relief. Because the operative concept of revocability is defined in s.63(a), the case law on s.62 overlaps heavily with that on ss.61 and 63.
A.5 Legislative evolution / FA amendment trail
ITA 1922 (provisos to s.16(1)(c)): The predecessor provisos performed the same relieving function for transfers irrevocable for a defined period.
ITA 1961: Re-enacted as s.62, restructured with the lifetime-of-beneficiary test in clause (i) and the residual six-year test (for pre-1 April 1961 transfers) in clause (ii), and with the 'no benefit' proviso common to both.
FA 2026: NO AMENDMENT to s.62. The FA 2026 amendment trail makes no change to Chapter V.
A.6 CA practitioner pointers
(1) For any settlement intended to shift income, ensure it is irrevocable during the lifetime of the beneficiary (clause (i)); the pre-1 April 1961 six-year alternative in clause (ii) is now of historical relevance only. (2) Eliminate every string that could confer a direct or indirect benefit on the settlor — reversion, discretionary inclusion of the settlor among beneficiaries, or any collateral advantage will forfeit the relief under the proviso. (3) Watch s.62(2): the relief evaporates the instant the power to revoke arises, so a settlement that becomes revocable on a future date will draw the income back to the settlor from that point. (4) Read the deed against s.63(a) — a buried re-transfer or re-assumption clause defeats s.62 entirely. (5) Maintain documentation showing the settlor obtained no benefit, as the burden of bringing the case within the exception lies on the assessee.
B. FA 2026 IMPACT NOTE
Section 62 of the Income-tax Act, 1961 is NOT amended by the Finance Act, 2026. Its language, scope and operation are unchanged.
Corresponding provision in the new law: Under the Income-tax Act, 2025 (w.e.f. 1 April 2026) the exceptions in s.62, being part of the revocable-transfer rule, are carried forward (consolidated with the s.61 charge) as section 97 of that Act in substantially identical terms. The decided authority below continues to govern.
C. CASE LAW
Sections 61, 62 and 63 form one scheme and share a common body of authority. The decisions below are the leading cases on the irrevocability exception and on the 'no benefit' condition.
Cluster C-1 : Irrevocability, genuineness and the limits of the exception
1. Tulsidas Kilachand v. CIT (1961) 42 ITR 1 (SC)
Facts: The assessee declared a trust over shares to pay the income to his wife for seven years or her earlier death, declaring the trust irrevocable, and claimed the income fell outside his total income by virtue of the relieving proviso (predecessor of s.62).
Issue: Whether a trust declared irrevocable but limited to a fixed term, supported only by natural love and affection, fell within the relieving exception; and the meaning of 'adequate consideration'.
Held: The Supreme Court held that natural love and affection is good but not adequate consideration; the arrangement remained within the clubbing scheme. The Court examined the precise conditions on which a time-limited trust is, or is not, relieved from the charge.
Ratio: The leading authority on the relieving exception and on 'adequate consideration'; demonstrates that a fixed-term trust does not automatically escape the charge and that the relief is narrowly conditioned.
2. Jyotendrasinhji v. S. I. Tripathi (1993) 201 ITR 611 (SC)
Facts: Discretionary settlements were created for the benefit of the settlor and his family, with the settlor retaining powers over the trust property.
Issue: Whether the settlements were saved by the irrevocability exception, or were revocable (and benefit-conferring) so as to attract the charge to the settlor.
Held: The Supreme Court held that the settlements fell within s.63(a)(ii) (right to re-assume power) and that the income was rightly included in the settlor's hands; the irrevocability exception did not apply because the settlor retained powers amounting to revocability and stood to benefit.
Ratio: Confirms that a settlement which reserves powers to the settlor cannot claim the s.62 exception — it is revocable under s.63(a) and the 'no benefit' condition is not satisfied. Read with Tulsidas Kilachand, it maps the outer limits of the relief.
Function in the statutory architecture
Section 62 carves out from s. 61 — irrevocable transfers (during lifetime of beneficiary / transferee) escape clubbing. However, s. 62(2) restores clubbing if the transferor derives direct or indirect benefit. The provision balances genuine alienation against avoidance: a transfer is acceptable only if the transferor cannot re-acquire AND derives no benefit.
Historical context / FA amendment trail
Stable since 1961.
Operative consequences
• Trust transfers irrevocable during beneficiary lifetime — no clubbing.
• Non-trust transfers irrevocable during transferee lifetime — no clubbing.
• Anti-benefit rule: s. 62(2) restores clubbing if transferor benefits directly or indirectly.
Case Laws & Commentary
SECTION 62 — TRANSFER IRREVOCABLE FOR A SPECIFIED PERIOD
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position and purpose
Section 62 is the relieving provision of the revocable-transfer scheme. It carves out from the charge in s.61 those transfers that, although they may ultimately become revocable, are genuinely beyond the transferor's recall for a defined period or during a beneficiary's lifetime, AND from which the transferor derives no direct or indirect benefit. The provision recognises that a settlement which truly puts the property beyond the settlor's reach for the relevant period ought not to be treated as a sham. But the relief is conditional and temporary: the moment the power to revoke arises, s.62(2) restores the charge to the transferor. Section 62 cannot be read in isolation from s.61 (the charge) and s.63 (the definitions).
A.2 Statutory text (verbatim)
62. (1) The provisions of section 61 shall not apply to any income arising to any person by virtue of a transfer—
(i) by way of trust which is not revocable during the lifetime of the beneficiary, and, in the case of any other transfer, which is not revocable during the lifetime of the transferee; or
(ii) made before the 1st day of April, 1961, which is not revocable for a period exceeding six years :
Provided that the transferor derives no direct or indirect benefit from such income in either case.
(2) Notwithstanding anything contained in sub-section (1), all income arising to any person by virtue of any such transfer shall be chargeable to income-tax as the income of the transferor as and when the power to revoke the transfer arises, and shall then be included in his total income.
A.3 Essential ingredients
(1) A transfer falling in one of two classes — either (a) a trust not revocable during the lifetime of the beneficiary (or, for any other transfer, not revocable during the lifetime of the transferee); or (b) a transfer made before 1 April 1961 which is not revocable for a period exceeding six years.
(2) The transferor derives no direct or indirect benefit — this proviso applies to both classes and is strictly construed. Any benefit to the transferor, however indirect or contingent, defeats the exemption.
(3) Temporary nature of the relief — by s.62(2), the income becomes chargeable to the transferor as and when the power to revoke arises. The exemption holds only so long as the transfer remains genuinely irrevocable for the relevant period and confers no benefit on the transferor.
A.4 Doctrinal themes
Two themes recur: (i) the genuineness and irrevocability of the settlement — whether, on a true construction of the deed, the transferor has in fact placed the property beyond recall for the period required by s.62(1); and (ii) the 'no direct or indirect benefit' condition — the courts have read this expansively, so that reversionary, contingent or collateral benefits to the settlor are enough to forfeit the relief. Because the operative concept of revocability is defined in s.63(a), the case law on s.62 overlaps heavily with that on ss.61 and 63.
A.5 Legislative evolution / FA amendment trail
ITA 1922 (provisos to s.16(1)(c)): The predecessor provisos performed the same relieving function for transfers irrevocable for a defined period.
ITA 1961: Re-enacted as s.62, restructured with the lifetime-of-beneficiary test in clause (i) and the residual six-year test (for pre-1 April 1961 transfers) in clause (ii), and with the 'no benefit' proviso common to both.
FA 2026: NO AMENDMENT to s.62. The FA 2026 amendment trail makes no change to Chapter V.
A.6 CA practitioner pointers
(1) For any settlement intended to shift income, ensure it is irrevocable during the lifetime of the beneficiary (clause (i)); the pre-1 April 1961 six-year alternative in clause (ii) is now of historical relevance only. (2) Eliminate every string that could confer a direct or indirect benefit on the settlor — reversion, discretionary inclusion of the settlor among beneficiaries, or any collateral advantage will forfeit the relief under the proviso. (3) Watch s.62(2): the relief evaporates the instant the power to revoke arises, so a settlement that becomes revocable on a future date will draw the income back to the settlor from that point. (4) Read the deed against s.63(a) — a buried re-transfer or re-assumption clause defeats s.62 entirely. (5) Maintain documentation showing the settlor obtained no benefit, as the burden of bringing the case within the exception lies on the assessee.
B. FA 2026 IMPACT NOTE
Section 62 of the Income-tax Act, 1961 is NOT amended by the Finance Act, 2026. Its language, scope and operation are unchanged.
Corresponding provision in the new law: Under the Income-tax Act, 2025 (w.e.f. 1 April 2026) the exceptions in s.62, being part of the revocable-transfer rule, are carried forward (consolidated with the s.61 charge) as section 97 of that Act in substantially identical terms. The decided authority below continues to govern.
C. CASE LAW
Sections 61, 62 and 63 form one scheme and share a common body of authority. The decisions below are the leading cases on the irrevocability exception and on the 'no benefit' condition.
Cluster C-1 : Irrevocability, genuineness and the limits of the exception
1. Tulsidas Kilachand v. CIT (1961) 42 ITR 1 (SC)
Facts: The assessee declared a trust over shares to pay the income to his wife for seven years or her earlier death, declaring the trust irrevocable, and claimed the income fell outside his total income by virtue of the relieving proviso (predecessor of s.62).
Issue: Whether a trust declared irrevocable but limited to a fixed term, supported only by natural love and affection, fell within the relieving exception; and the meaning of 'adequate consideration'.
Held: The Supreme Court held that natural love and affection is good but not adequate consideration; the arrangement remained within the clubbing scheme. The Court examined the precise conditions on which a time-limited trust is, or is not, relieved from the charge.
Ratio: The leading authority on the relieving exception and on 'adequate consideration'; demonstrates that a fixed-term trust does not automatically escape the charge and that the relief is narrowly conditioned.
2. Jyotendrasinhji v. S. I. Tripathi (1993) 201 ITR 611 (SC)
Facts: Discretionary settlements were created for the benefit of the settlor and his family, with the settlor retaining powers over the trust property.
Issue: Whether the settlements were saved by the irrevocability exception, or were revocable (and benefit-conferring) so as to attract the charge to the settlor.
Held: The Supreme Court held that the settlements fell within s.63(a)(ii) (right to re-assume power) and that the income was rightly included in the settlor's hands; the irrevocability exception did not apply because the settlor retained powers amounting to revocability and stood to benefit.
Ratio: Confirms that a settlement which reserves powers to the settlor cannot claim the s.62 exception — it is revocable under s.63(a) and the 'no benefit' condition is not satisfied. Read with Tulsidas Kilachand, it maps the outer limits of the relief.