Fate of Unexplained Income under the Income Tax Act
Fate of Unexplained Income under the Income Tax Act
- What is Undeclared or Unexplained Income?
It is now-a-days very common that many people are worried because they have not declared some or all of their income to HM Revenue and Custom or to the I.T. Department The reason for Such behavior is to evade tax and thought that it was best to keep quiet. But what they do not think is the result can be alarming to them. It can lead them to a great deal of anxiety. The consequences of evading tax can be penal at times for many tax evaders. The merely keeping silent can put them into deep trouble.
- Unexplained Income under the Income Tax Act
According to the provisions of the Income Tax Act some unexplained income are deemed as income. This is provided in Sections 68, 69, 69A, 69B, 69C, 69D of the Act. Those incomes are liable to be taxed under the rates normally applicable. No exemption is given in those cases. But no tax is imposed if the income is less than the basic exemption limit. In cases where the income is even more than the exemption limit tax is levied at a lower rate.
- Reasons for imposing Tax on Unexplained Income
People have a tendency to utilize their unexplained money by taking advantage of the basic exemption limit. To check such tendencies, the I.T. Department proposed to impose tax upon every unexplained income, expenditure, investment, etc. at the rate of 30% along with the surcharge applicable. This is going to be applicable from the financial year 2012-2013 as well as the following years.
According to the I.T. Act where an assessee fails to maintain any books of account or fails to give any explanation or the explanation given is not satisfactory for any investment, the value of such investment shall be deemed to be his income. Tax shall be levied on such investments. This is provided in Section 69 of the I.T. Act.
- Cases Which Do Not Fall under The Head “Unexplained Income“:
It is to be remembered that income from unknown sources under Section 68, contained in Chapter VI of the I.T. Act cannot be deemed as income from other sources. But merely making an entry in bank statement cannot be treated as unexplained income.
