The section supplies two definitions that operate for sections 96 and 97 and for the section itself. Clause (a) gives "transfer" an inclusive meaning: it includes any settlement, trust, covenant, agreement or arrangement. Clause (b) deems a transfer to be revocable in two situations — where 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 where 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.
Why it is there
Sections 96 and 97 turn on whether a transfer is revocable, and without this section that word would carry only its general legal meaning, which is easily drafted around. Clause (a) stops an arrangement escaping because it is not a conveyance, and clause (b) makes the test the retention of a power or a right of return, whether direct or indirect, rather than the actual exercise of it.
Who it applies to
A transferor who settles income or assets by any settlement, trust, covenant, agreement or arrangement
A transferor who retains a right to re-assume power over the income or assets, directly or indirectly
A transferee under such an arrangement, whose income may be attributed to the transferor
An Assessing Officer applying sections 96 and 97
What this means in practice
The test in clause (b) is about what the instrument permits, not about what has happened. A trust deed that lets the settlor direct the return of the corpus at some future point is a revocable transfer from the outset, even if the power is never used and nothing is ever re-transferred. Both limbs reach indirect arrangements, so a chain of documents or a power routed through another person is caught, and a part is enough — a provision for re-transfer of any part of the income or assets makes the transfer revocable. Clause (a) matters independently: because "transfer" includes an arrangement, the absence of a formal deed of transfer is not an answer.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
An individual settles a property on trust for his adult children, with a clause allowing him to instruct the trustees to return the corpus to him after ten years. Nothing is re-transferred and the children receive the rent. The transfer is nonetheless revocable under clause (b)(ii), because the deed gives the transferor a right to re-assume power over the assets, and sections 96 and 97 apply from the start rather than from the day the power is exercised.
Where you meet this section
This is not a section anyone receives a notice under. It is the definition an Assessing Officer relies on in an assessment order when income from a trust, settlement or family arrangement is brought back into the transferor's hands under sections 96 and 97, and the first place to look when contesting that.
The words themselves
"transfer" includes any settlement, trust, covenant, agreement or arrangement
Section 98(a), Income-tax Act, 2025.
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
Section 98(b)(i), Income-tax Act, 2025.
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.
Section 98(b)(ii), Income-tax Act, 2025.
What people get wrong
Arguing that nothing was ever re-transferred. Clause (b)(i) is satisfied by a provision for re-transfer, and clause (b)(ii) by a right to re-assume power; neither requires exercise.
Treating a partial power as harmless. Both limbs of clause (b) apply to the whole or any part of the income or assets.
Reading the definitions more widely than they go. The section opens "For the purposes of sections 96 and 97, and this section", so it does not define "transfer" for the rest of the Act.
Assuming a purely informal arrangement is outside the section. Clause (a) includes any settlement, trust, covenant, agreement or arrangement.
Looking only at the transfer document. Clause (b) catches indirect re-transfer and indirect power, so an arrangement routed through another person is still within it.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 98. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
Radhasoami Satsang v CITSupreme CourtHelps taxpayertagged s.63 The department accepted your position for years and has now reversed it. Can it?
UTI Mutual Fund v ITOHigh CourtHelps taxpayertagged s.63 Can they attach your bank account while the stay application is still pending?
Read with
Section 96
Section 97
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.
