Section 115BBE of the Income Tax Act speaks about taxation on the income mentioned in Section 68, 69, 69A, 69B, 69C or Section 69D. Any income received by the assessee in a year is subjected to income tax under certain sections. However, issues arise if the source of income is not known clearly. In order to bring such income under the tax ambit, the government introduced Section 115BBE of the Income Tax Act, 1961 through the Finance Act of 2012.
Read on to understand Section 115BBE, the sub-sections, tax payable and surcharge and when is Section 115BBE not applicable.
Sub-Sections under 115BBE of Income Tax
As per the existing provisions of the Income Tax Act amounts received from unknown sources are regarded as income under Section 68, 69, 69A, 69B, 69C or 69D and are subjected to a tax rate of 30%. This section of the Income Tax Act involves these provisions:
If the total income of any assessee would include
Any income mentioned in Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D and reflected in income return furnished under Section 139, or
Any income determined by an Assessing Officer that falls under the above-mentioned section, if not included under clause (a).
Then the overall payable tax would be a total of –
The entire tax on income is mentioned in both clause (a) and clause (b) at a 60% rate.
The amount of tax that one had to pay in case total income is lowered by the income mentioned under clause (i).
Regardless of what Section 115BBE of the Income Tax Act, 1961specifies, no deduction is applicable with respect to any allowance or expenditure to the assessee under any of the provisions while evaluating the income mentioned in clauses (a) and (b).
Income-Tax Payable and Surcharge Amount under Section 115BBE
Section 115BBE of the Income Tax Act amendment is applicable to all assesses regardless of legal statuses, such as HUFs, cooperative society, AOP, political parties, individuals, etc.
Besides, it applies to all residents and non-residents. The income specified in the above-mentioned sections is taxable at 60%. In addition, this section also includes a surcharge of 25% and an education cess of 4%.
When is Income Tax under Section 115BBE Not Applicable?
Section 115BBE and its provisions are only applicable to incomes that fall under Sections 68, 69, 69A, 69B, 69C and 69D. So, if the income does not fall under any of these sections, then the provisions of this section are not applicable.
The higher tax rate will be applicable on income/investment/expenditure that one cannot explain the source of.
After having clarity on Section 115BBE of the Income Tax Act one can be aware of the tax rate that they have to pay in case they are unable to explain the source of certain income or expenditure. If you have any such income or investment that you cannot provide an explanation for, make sure to be aware of Section 115BBE and the provisions that would apply to you.
FAQS on Section 115BBE
Q1. What does Section 69 define?
Ans: In a year, if an individual makes certain investments that books of account do not cover, and the taxpayer does not reveal his/her source of income, the Assessing Officer considers this overall value of investments as his/her income for that particular year and imposes a tax on it.
Q2. What does Section 69B?
Ans: Let’s assume a taxpayer makes certain investments or acquires valuable assets in a given year. The Assessing Officer finds that the amount spent on making these investments or acquiring these articles exceeds the amount recorded on this behalf in books of account. However, the taxpayer offers no explanation for it. Therefore, if the Assessing Officer finds it unsatisfactory, he/she will consider the excess amount as the individual’s income for that year.
Q3.What does Section 69C define?
Ans:If a taxpayer incurs certain expenditures and offers no satisfactory explanation about the source of such expenses, then the Assessing Officer will consider this amount or a part of it as taxable income for that particular year.
Q4. What was the amendment of Section 115BBE?
Ans: Following demonization, the government introduced Section 115BBE of the Income Tax Act amendment and raised the taxation rate on unexplained income or expenses to 60% from its pre-existing 30% rate. This new rate was effective from AY 2017 to 2018.
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