Section 115BBE: Tax Rate on Undisclosed Income

Exploring the tax implications of undisclosed income covered under Sections 68 to 69D, this section highlights the substantial 60% tax rate, accompanied by a 25% surcharge and a 4% EC, resulting in an effective tax rate of 78%.

Key Sections Explained

Section 68: Cash Credits

This section delves into the provision that deems any unexplained credits in the bank, not accounted for or satisfactorily explained, as the Assessee’s income. The Assessee must fulfill specific conditions to avoid falling under this section.

Section 69A: Unexplained Money etc

Exploring situations where the Assessee is found to be the owner of undisclosed money, bullion, or valuable articles, this section outlines the circumstances under which such assets may be deemed as the Assessee’s income.

Section 69B: Investment Partly Disclosed in Books

Highlighting instances where investments are recorded in books at a lesser amount, this section explains the criteria under which the excess amount not recorded or inadequately explained may be deemed as the Assessee’s income.

Section 69C: Unexplained Expenditure etc

This section covers cases where the Assessee incurs expenditure without providing a satisfactory explanation for its source. The undisclosed expenditure may be deemed as the Assessee’s income for the financial year.

Section 69D: Amount Borrowed or Repaid on Hundi

Exploring the implications of borrowing or repaying an amount on a hundi, this section specifies that such transactions, if not conducted through an account payee cheque, shall be deemed as the Assessee’s income for the relevant previous year.

Fulfilling Conditions Under Section 68

To avoid the application of Section 68, the Assessee must meet four crucial conditions:

1. Provide the Identity of the Creditor:

   • Name, address, and relevant details of the creditor.
   • Confirmation letter from the creditor.

2. Provide the Nature of the Credit:

   • Explanation supported by relevant documents like loan agreements or gift deeds.

3. Prove the Creditworthiness of the Creditor:

   • Financial statements, tax returns, and bank statements of the creditor.

4. Provide the Genuineness of the Transaction:

   • Documentation proving the transaction’s authenticity.

Conclusion

This comprehensive article covers the tax implications of undisclosed income under various sections, providing valuable insights for students’ revision. Understanding these sections is crucial for individuals navigating the complexities of income tax regulations.