The Income Tax Act, 2025 came into effect on 1 April 2026, replacing the 60-year-old Income Tax Act, 1961. The new Act reorganises, simplifies, and renumbers all provisions - including the clubbing provisions that were previously contained in Sections 60-64. Under the new Act, these are now Sections 96-100.
For CA professionals, tax practitioners, and taxpayers managing family finances, the critical question is: did anything actually change in substance, or is this just a renumbering exercise? This guide provides a section-by-section analysis, highlights the one substantive tweak that affects the spouse salary clubbing test, and explains the transition rules.
Overview: What Happened to Sections 60-64
The Income Tax Act, 2025 contains 536 sections (down from 819 in the 1961 Act). The clubbing provisions have been consolidated into a compact five-section block:
| Old Act (ITA 1961) | New Act (ITA 2025) | Subject | Change Type |
|---|---|---|---|
| Section 60 | Section 96 | Transfer of income without transfer of asset | Renumbered - substance identical |
| Section 61 | Section 97 | Revocable transfer of assets - income taxed in transferor's hands | Renumbered - substance identical |
| Section 62 | Merged into Section 98 | Irrevocable transfer exception - when Section 97 does not apply | Merged with Section 63 into Section 98 |
| Section 63 | Merged into Section 98 | Definition of "transfer" and "revocable transfer" | Merged with Section 62 into Section 98 |
| Section 64 | Section 99 | Income of individual to include income of spouse, minor child, etc. | Renumbered + one substantive tweak (spouse qualification test) |
| Section 65 | Section 100 | Liability of person in respect of income included in another person's income | Renumbered - substance identical |
For individuals managing income tax return filing, the practical impact is minimal - the same clubbing rules apply. But the section numbers used in ITR forms, assessment orders, and notices will change for Tax Year 2026-27 onwards.
Section 96 (Old Section 60): Transfer of Income Without Transfer of Asset
What it says: If a person transfers income from an asset to another person without transferring the asset itself, the income remains taxable in the transferor's hands.
What changed: Nothing substantive. The language has been simplified using plainer terms consistent with the new Act's drafting style. The operative rule is identical.
Example: Mr. A owns a commercial property. He assigns the right to collect rent to Mr. B through an agreement - but retains property ownership. Under Section 96, rent is taxed in A's hands. Same result as old Section 60.
Section 97 (Old Section 61): Revocable Transfer of Assets
What it says: All income arising to any person by virtue of a revocable transfer of assets is taxable in the hands of the transferor. The transfer is treated as if it did not happen for tax purposes.
What changed: Nothing substantive. The revocable transfer concept is preserved intact. The definition of what constitutes a revocable transfer (previously in Section 63) is now incorporated into Section 98.
Example: Mrs. B creates a trust with a revocation clause. Trust income of Rs 1.5 lakh is taxed in Mrs. B's hands under Section 97. Same result as old Section 61.
Section 98 (Old Sections 62 + 63): Transfer and Revocable Transfer Defined
What it says: Section 98 combines the content of old Sections 62 (irrevocable transfer exception) and 63 (definition of revocable transfer) into a single consolidated section. It defines when a transfer is deemed revocable and when Section 97 does not apply.
What changed: Structural change only - two sections merged into one for readability. The substance is identical:
- A transfer is revocable if it contains any provision for re-transfer of income or assets to the transferor, or if it gives the transferor the right to reassume control - same as old Section 63
- Section 97 does not apply if the transfer is irrevocable during the beneficiary's lifetime and the transferor derives no direct or indirect benefit - same as old Section 62
- When revocation power arises in a previously irrevocable transfer, income becomes taxable in the transferor's hands from that date - same as old Section 62(2)
Professional tax planning services should update trust deed and settlement agreement references from Sections 61-63 to Sections 97-98 for all new arrangements from Tax Year 2026-27.
Section 99 (Old Section 64): The Main Clubbing Provision - With One Substantive Change
What it says: Section 99 reproduces the full content of old Section 64 - income of spouse, minor child, daughter-in-law, and HUF included in the individual's total income under specified conditions.
What changed: All sub-sections are preserved with one notable tweak in the spouse salary clubbing exception:
The Spouse Qualification Change
Old Section 64(1)(ii): The exception from clubbing required TWO separate conditions: (1) the spouse must possess "technical or professional qualifications," AND (2) the income must be solely attributable to the application of those qualifications. Both conditions had to be independently satisfied.
New Section 99: The first condition (spouse having "technical or professional qualifications") has been removed as a standalone requirement. Instead, "qualification" has been merged into the second condition alongside "knowledge and experience." The test is now a single unified condition: the income must be attributable to the application of the spouse's qualification, knowledge, or experience.
| Aspect | Old Section 64(1)(ii) | New Section 99 |
|---|---|---|
| Test structure | Two separate conditions - both must be met | Single unified condition |
| First condition | Spouse must have "technical or professional qualifications" | Removed as standalone requirement |
| Second condition | Income must be attributable to those qualifications | Income must be attributable to qualification, knowledge, OR experience |
| Practical impact | If spouse had no formal qualifications but had relevant experience, exception MIGHT fail on first condition | If spouse has relevant qualification OR knowledge OR experience, exception applies - broader and clearer |
| Who benefits? | Only spouses with formal professional qualifications (CA, doctor, MBA, etc.) | Spouses with relevant experience or knowledge - even without formal degree - may qualify |
Why this matters: Under the old Act, courts debated whether "experience" alone (without a formal qualification) was sufficient to avoid clubbing. The landmark case Dr. J.M. Mokashi v. CIT suggested both conditions were independent and the first (qualification) could not be substituted by the second (knowledge). Under the new Act, this ambiguity is resolved - qualification, knowledge, AND experience are now a single combined test. A spouse with relevant work experience but no formal degree may now qualify for the exception more easily.
For salaried individuals whose spouse works at their company, refer to ITR filing for salary for correct reporting of clubbed or exempt spouse salary.
All Other Sub-Sections: No Change
| Sub-Section | Subject | Change |
|---|---|---|
| 99(1)(iv) - old 64(1)(iv) | Asset transferred to spouse without consideration | No change - income clubbed with transferor |
| 99(1)(vi) - old 64(1)(vi) | Asset transferred to daughter-in-law without consideration | No change |
| 99(1)(vii) - old 64(1)(vii) | Indirect transfer for benefit of spouse | No change |
| 99(1)(viii) - old 64(1)(viii) | Indirect transfer for benefit of daughter-in-law | No change |
| 99(1A) - old 64(1A) | Minor child income clubbed with higher-earning parent | No change - same exceptions (skill, disability) |
| 99(2) - old 64(2) | Personal asset transferred to HUF without consideration | No change |
| Rs 1,500 minor exemption - Section 10(32) | Exemption for minor child clubbed income | No change - amount and conditions identical |
| Substantial interest threshold | 20% voting power / profit share | No change |
Section 100 (Old Section 65): Liability for TDS on Clubbed Income
What it says: Section 100 preserves the rule that when income is included in another person's total income under Sections 96-99, the liability for tax on that income follows the clubbed income. TDS credit mapping via Rule 37BA continues unchanged.
What changed: Nothing substantive. Renumbered only. Ensure TDS return filing uses updated section references for Tax Year 2026-27 returns.
Transition Rules: When Does Each Act Apply?
| Scenario | Which Act Applies | Section Numbers to Use |
|---|---|---|
| ITR filing for FY 2025-26 (AY 2026-27) | Income Tax Act, 1961 | Sections 60-64 |
| Assessment/reassessment for FY 2025-26 and prior years | Income Tax Act, 1961 | Sections 60-64 |
| Pending appeals for prior year orders | Income Tax Act, 1961 | Sections 60-64 |
| ITR filing for Tax Year 2026-27 (from April 2026) | Income Tax Act, 2025 | Sections 96-100 |
| New assessment orders for Tax Year 2026-27 onwards | Income Tax Act, 2025 | Sections 96-100 |
| Trust deeds/settlement agreements executed after 1 April 2026 | Income Tax Act, 2025 | Reference Sections 97-98 |
Key principle: The law applicable depends on the year of income, not the date of compliance action. Income earned in FY 2025-26 (AY 2026-27) is governed by the 1961 Act. Income earned from Tax Year 2026-27 (1 April 2026 onwards) is governed by the 2025 Act. Both Acts may run in parallel during the transition period.
What Practitioners Should Do Now
- Update template ITR worksheets to reference Sections 96-100 instead of 60-64 for Tax Year 2026-27 filings
- Review trust deeds and settlement agreements - if executed after 1 April 2026, reference the new sections. For agreements executed before, old section references remain valid for existing proceedings
- Reassess spouse salary clubbing cases - the broadened "qualification, knowledge, or experience" test under Section 99 may allow exceptions that were previously disputed under old Section 64(1)(ii)
- Update client communication and advisory templates - section numbers in notices, opinions, and reports should reflect the applicable Act
- Monitor CBDT circulars - the Department may issue clarifications on the spouse qualification change and other transitional aspects. For investment-related clubbing, refer to ITR for capital gains for updated section references in capital gains clubbing scenarios.
Key Takeaways
The Income Tax Act, 2025 replaces Sections 60-64 with Sections 96-100. The clubbing framework is preserved intact with one substantive tweak: Section 99 broadens the spouse salary exception by merging "qualification" into the "knowledge and experience" test.
Old Sections 62 (irrevocable exception) and 63 (revocable transfer definition) are merged into a single Section 98 for cleaner readability. No substantive change - just structural simplification.
For FY 2025-26 ITR filing (AY 2026-27), use old Act section numbers (60-64). From Tax Year 2026-27, use new Act section numbers (96-100). Both Acts run in parallel during the transition period.
The spouse qualification change in Section 99 is the most practically significant update. Spouses with relevant work experience but no formal professional degree may now more easily qualify for the clubbing exception - resolving a judicial ambiguity under the old Act.
All other clubbing provisions - minor child (Section 99(1A)), daughter-in-law (Section 99(1)(vi)/(viii)), HUF (Section 99(2)), Rs 1,500 exemption, 20% substantial interest - are unchanged in substance.
Need Help with Income Tax Return Filing?
Navigating the transition from the 1961 Act to the 2025 Act requires understanding which section numbers apply for which year, how the spouse qualification change affects your family situation, and how to update documentation for new arrangements. Professional CA assistance ensures accurate compliance under both Acts.
Explore our income tax return filing and tax planning services for expert guidance.
For queries, reach out at +91 945 945 6700 or WhatsApp us directly.
