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 transaction.
- Non-Reassessment:
- If taxed once under Section 69D, the same amount cannot be taxed againon repayment.
2. Tax Treatment
| SCENARIO | TAX IMPACT |
| Cash Borrowing on Hundi | Entire amount deemed income (e.g., ₹5L borrowed in cash → ₹5L added to income). |
| Cash Repayment (Principal + Interest) | Total repaid (including interest) deemed income. |
| Bank Channel Used | No addition under Section 69D. |
- Tax Rate: 60% + 25% surcharge + 4% cess = 25%(if classified as unexplained income under Section 115BBE).
3. Exceptions & Defences
- Valid Explanation: Prove the source of funds (e.g., past savings, loans with documentation).
- Bank Transactions: Use account payee chequesto avoid scrutiny.
- No Double Taxation: Once taxed, repayment does not trigger reassessment.
4. Penalties
- Concealment Penalty: 100–300% of tax evaded (if undisclosed in ITR).
- Prosecution Risk: For willful evasion.
