Section 115BBE of ITA, 1961 : Section 115Bbe: Tax On Income Referred To In Section 68 Or Section 69 Or Section 69A Or Section 69B Or Section 69C Or Section 69D

Explanation using Example

Imagine Mr. Sharma, a businessman, has not recorded ₹5,00,000 of cash sales in his books of account. During the assessment, the Income Tax Authority determines this amount falls under the category of unexplained income as per section 69A of the Income-tax Act, 1961, because Mr. Sharma could not provide a satisfactory explanation for this cash.

According to Section 115BBE, Mr. Sharma's income tax will be calculated as follows:

1. The unexplained cash sales of ₹5,00,000 will be taxed at a flat rate of 60%, which amounts to ₹3,00,000.
2. No deduction or set off for any expenses or losses will be allowed against this income of ₹5,00,000.
3. Mr. Sharma's other income (let's say ₹10,00,000) will be taxed as per the normal slabs and rates applicable to him.

In summary, Mr. Sharma will have to pay ₹3,00,000 as tax on the unexplained cash sales without any benefits of deductions or set-offs, and his other income will be taxed separately as per the applicable income tax slabs.