Unexplained Money

Under the Income Tax Act, 1961, certain transactions or scenarios are treated as “deemed profits” and taxed under “Profits and Gains of Business or Profession” (PGBP), even if they do not strictly qualify as business income. These provisions prevent tax evasion by bringing unexplained or artificially reduced income into the tax net. A. Unexplained Cash Credits (Section 68) Applicability: […]

Section 68 is a critical anti-evasion provision that targets unexplained sums credited in a taxpayer’s books of accounts. It ensures financial transparency by requiring taxpayers to justify the source and nature of cash credits, failing which the amount is treated as taxable income. Key Features of Section 68 Applicability Applies to all taxpayers(individuals, firms, companies, HUFs)

1. Key Features of Section 69 Objective: Targets unexplained investments(e.g., property, gold, shares) not recorded in books. Deemed Income: Treated as taxable incomein the year of investment. Burden of Proof: Assessee must explain the sourceand nature of investment. Tax Rate: 60% + 25% surcharge + 4% cess = 25%(under Section 115BBE). 2. Conditions for Invoking Section 69 Investment Exists(e.g., property, jewelry, shares).

1. Key Features of Section 69A Objective: Targets unexplained money, jewellery, or assetsfound in possession but not recorded in books. Deemed Income: Treated as taxable incomein the financial year of discovery. Burden of Proof: Assessee must explain the sourceof the money/assets. Tax Rate: 60% + 25% surcharge + 4% cess = 25%(under Section 115BBE). 2. Conditions for Invoking Section 69A

1. Key Features of Section 69B Objective: Targets underreported investmentswhere actual expenditure > recorded value in books. Deemed Income: Difference between actual costand recorded value is taxable. Burden of Proof: Assessee must justify the lower valuationor face additions. Tax Rate: Normal slab rates (not 115BBE) unless proven as unexplained income. 2. When Does Section 69B Apply? Investment Exists(property, gold, shares,

1. Key Features of Section 69C Objective: Targets unexplained expenseswhere the assessee cannot prove the source of funds. Deemed Income: The entire unexplained expenditure is treated as taxable income. Burden of Proof: The assessee must justify the source of fundsfor the expense. Tax Rate: Normal Cases: Taxed at applicable slab rates. If linked to undisclosed income: 60% +

Section 69D targets hundi transactions (an informal financial instrument) conducted without banking channels, treating such amounts as taxable income if repaid or borrowed in cash. 1. Key Provisions Applicability: Borrowing or repayingany amount on a hundi without an account payee cheque/bank draft. Includes interest paymentson such borrowings. Deemed Income: The amount is treated as income of the borrower/repayerin the year of

Section 115BBE of the Income Tax Act, 1961 imposes a flat 60% tax rate (plus 25% surcharge and 4% cess, totaling 77.25%) on unexplained income falling under Sections 68 to 69D, including income classified under “Profits and Gains of Business or Profession” (PGBP). 1. Applicability to PGBP Section 115BBE applies to unexplained income detected in business/profession if: Income is unaccounted(not recorded in books or tax