Segregation of Aggregation of Income and Special Provisions between Income Tax Act, 2025 and Income Tax Act, 1961, under Chapter VI
Summary: The Income-tax Act, 202, effective from April 1, 2026, reorganizes provisions relating to unexplained income and assets into a clearer sequential structure under Chapter VI: Aggregation of Income. The earlier provisions under Sections 68 to 69D of the Income-tax Act, 1961 have been renumbered as Sections 102 to 106 to simplify interpretation and remove confusing alphanumeric references. The new framework integrates earlier explanations directly into the statutory text, including the “source of source” requirement for corporate credits. The Act also replaces the “Previous Year” and “Assessment Year” concepts with a unified “Tax Year” system. Unexplained income continues to attract a flat 60% tax under Section 195, without allowing deductions, expenses, or set-off losses. Importantly, Section 104 now expressly includes Virtual Digital Assets such as cryptocurrencies and NFTs within the definition of unexplained assets. The reforms are intended to improve readability, consistency, and enforcement while largely retaining existing substantive tax obligations.
Section Mapping: 1961 vs. 2025 1961, Act Section 2025, Act Section Subject Matter
Section 68 Section 102 Unexplained Credits: Any sum found in the books for which the source is not explained.
Section 69 Section 103 Unexplained Investment: Investments made but not recorded in the books of account.
Section 69A Section 104 Unexplained Asset: Money, bullion, jewelry, or other valuable articles (including Virtual Digital Assets/VDAs).
Section 69B Section 104 Under-reported Investments: Where the amount actually spent exceeds the amount recorded in books.
Section 69C Section 105 Unexplained Expenditure: Expenses incurred for which the source of funds is not explained.
Section 69D Section 106 Amount borrowed/repaid on Hundi: Specifically deals with Hundi transactions.
Key Changes in the 2025 Act.
1. Integration of the “Source of Source”
In the 1961 Act, Section 68 had a complex proviso regarding corporate share application money, requiring companies to prove the source of their investors’ funds. In Section 102 (2025 Act), this requirement is now a part of the main text, making the burden of proof for corporate credits much more explicit and harder to bypass.
2. The “Tax Year” Concept
The 2025 Act officially moves away from the “Previous Year / Assessment Year” terminology. Everything is now tied to a single “Tax Year.”
If an unexplained credit is found in your books in the financial year 2026-27, it is taxed in Tax Year 2026-27.
3. Taxation and Penalties Provision (Section 195)
While the section numbers for the offenses have changed, the punitive tax rate remains largely the same to ensure revenue neutrality.
The Tax Rate: Under Section 195 of the 2025 Act (the successor to Section 115BBE), unexplained income is taxed at a flat 60%.
No Deductions: Just like the old law, you cannot claim any business expenses, deductions, or set-off losses against this unexplained income.
4. Inclusion of Digital Assets
The definition of “assets” in Section 104 (formerly 69A) has been updated to explicitly include Virtual Digital Assets (VDAs) like Cryptocurrency and NFTs, closing the loop on digital “black money.”
Summary
The transition to Section 102 and 103 is designed to make the law “scannable.” For a taxpayer, the legal obligation remains the same: If you have money in your bank or a new property, you must be able to prove where the money came from. The only difference is that you’ll be citing different numbers in your tax audit reports starting in 2026
Author Bio
