Section 115BBE – “Tax on Income referred to in sec.68,sec.69,sec.69A,sec.69B, sec.69C or sec.69D

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Section 115BBE – “Tax on Income referred to in sec.68,sec.69,sec.69A,sec.69B, sec.69C or sec.69D

  1. Background of Sec.115BBE :

The provisions of sec.115BBE of the Income Tax Act, 1961, Applicable from Assessment Year 2017-18 onwards.

Certain unexplained cash credit, investment, expenditure, etc., are deemed as income under Section 68, Section 69, Section 69A, Section 69B, Section 69C and Section 69D of the Act and were earlier subject to tax as per the tax rate applicable to the taxpayer. As a consequence, in case of individuals, HUF, etc., no tax was levied up to the basic exemption limit and even if such income was higher than basic exemption limit, it could be levied at the lower slab rate.

  1. After amendment the provision is :

 Where the total income of an assessee,—

(a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or

(b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a),

the income-tax payable shall be the aggregate of—

 (i)  the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).]

(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance [or set off of any loss] shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) 65[and clause (b)] of sub-section (1).

Brief Analysis :

Section 115BBE of the Act, as amended by the Taxation Laws (Second Amendment) Act, 2016 w.e.f. asst year 2017-18 now specifically levies tax on such unexplained items deemed as income at the aggregate of:

  1. a) The amount of Income Tax calculated on the income referred to in sections 68, 69, 69A to 69D at the rate of 60 per cent (plus surcharge @ 25% on such tax and cess, as applicable). Thus effectively the rate comes to 78 per cent if such income is reflected in the return of income furnished u/s. 139. It may be noted that if such income is not reflected in the return of income furnished u/s. 139, then penalty of 10 per cent on tax payable u/s. 115BBE shall be imposed u/s. 271AAC w.e.f. asst. year 2017-18. In such a case the burden including penalty will come to 84%.
  2. b) The amount of Income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in sections 68, 69, 69A to 69D
  3. c) Moreover, no deduction in respect of any expenditure or allowance (or set off of any loss) shall be allowed to the assessee under any provision of the Income-tax Act in computing his income referred to in sections 68, 69, 69A to 69D.

 

 

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