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.
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
Then the overall payable tax would be a total of –
Regardless of what Section 115BBE of the Income Tax Act, 1961 specifies, 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).
Also Read: New Tax Regime Under Section 115 BAC: Features & Implementation
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%.
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.
Also Read: Section 115BAA: Provisions For New Tax Rate For Domestic Companies
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.
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.
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.
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.
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.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
Public Provident Fund (PPF) – Know PPF Details and Its Benefits
In 1968, the National Savings Institute introduced the PPF scheme. The Public Provident Fund (PPF) ... Read More »How to Withdraw PF Amount? – Step-by-Step Guide
EPF (Employees Provident Fund) is a popular savings scheme for employees in India. The Central Gove... Read More »Previous Year in Income Tax: Exceptions on Taxation
‘Previous Year’ in the Income Tax Act, 1961 is an important concept associated with the payment... Read More »What are Capital Receipts and What are its Types?
The concept of a receipt is easy to understand as it is described as a written record that a paymen... Read More »What is Anti-Dumping Duty (ADD) – Its Working, Examples and Calculation
Anti-dumping duty refers to a tax or other charges levied on a particular imported product. The con... Read More »Loan to Purchase Land – Types, Features, Eligibility and Documents Required
Loans for land purchase or plot loans are secured loans given for purchasing plots of land. Borrowe... Read More »List of 11 Tax-Free Income Sources in India (2023)
There are many sources through which a person can earn his/her income. It can be income from salary... Read More »New GST Rates in India (2023) – Latest Changes in GST Rates
GST or the Goods and Services Tax is one of the most significant tax reforms to be ushered in since... Read More »What is Input Tax Credit (ITC) in GST – Eligibility and Documents Required To Claim ITC
GST is consumption-based taxation levied at all stages in a value chain. Set-off of GST paid in the... Read More »What is Cess on Income Tax: Overview, Types and Calculation
Cess is a tax on taxes imposed by the Central Government or state governments for specific reasons.... Read More »Section 80EEB: Eligibility & Deduction Amount
Electric vehicles are better for the environment and an efficient alternative to fuel-run vehicles.... Read More »What is Section 80GGA: Deductions on Donations Made for Rural Development
Income Tax Act provides several opportunities for taxpayers to claim partial or full deductions. Se... Read More »Top 10 Chit Fund Schemes in India in 2023
Chit funds are one of the most popular return-generating saving schemes in India. It is a financial... Read More »10 Best Gold ETFs to Invest in India in February 2023
Gold ETFs or Gold Exchange Traded Funds are passively managed funds that track the price of physica... Read More »Top 10 Demat Accounts in India [Lowest Brokerage Charges]
A Demat account was created to eliminate the time-consuming and inconvenient procedure of purchasin... Read More »20 Best Index Funds in India to Invest in 2023 (Updated on 31st Jan)
What is an Index Fund? An index fund is a type of mutual fund or exchange-traded fund (ETF) that... Read More »Best Arbitrage Mutual Funds to Invest in India: Returns and Taxation
Arbitrage funds are hybrid mutual fund schemes that aim to make low-risk profits by buying and sell... Read More »Best SIP Mutual Funds To Invest In India (2023) – Its Types And Taxation
A Systematic Investment Plan (SIP) is a convenient way to invest a fixed sum in mutual funds. For i... Read More »10 Best Corporate Bond Funds in India 2023 – With Returns
Corporate bond funds are debt funds that invest at least 80% of the investment corpus in companies ... Read More »10 Best Banks for Savings Account in India (2023)
A savings account keeps your money safe, and lets you earn interest every quarter. There are many b... Read More »All information is subject to specific conditions | © 2023 Navi Technologies Ltd. All rights are reserved.
Start Small. Dream Big.
Start your Investment Journey with just ₹10