Tax treatment of amounts borrowed or repaid through instruments like hundis in Clause 106 of the Income Tax Bill, 2025, Vs. Section 69D of the Income Tax Act, 1961

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..... me Tax Bill, 2025 Introduction Clause 106 of the Income Tax Bill, 2025, and Section 69D of the Income Tax Act, 1961, both address the treatment of amounts borrowed or repaid through instruments like hundis and negotiable instruments, specifically when such transactions do not occur through an account payee cheque. These provisions aim to curb tax evasion by ensuring that transactions through inf .....

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..... ransactions occur through an account payee cheque, the provisions aim to create a traceable record, facilitating better oversight by tax authorities. Clause 106 expands this framework by including negotiable instruments and allowing the Board to specify additional modes of transaction, reflecting a proactive approach to encompass emerging financial practices. Detailed Analysis Clause 106 of the .....

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..... double taxation on the same transaction, maintaining fairness in the tax system. Section 69D of the Income Tax Act, 1961 1. Specific to Hundis: Section 69D specifically targets transactions involving hundis, a traditional form of credit instrument in India. It reflects the historical context where hundis were commonly used for informal credit, often escaping the formal financial system's s .....

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..... zed financial transactions. The requirement to use account payee cheques or specified modes ensures that there is a clear record of transactions, reducing the opportunity for tax evasion. Businesses may need to adjust their financial practices to ensure compliance, particularly if they have traditionally relied on informal credit instruments like hundis. For regulators, these provisions enhance th .....

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..... ax evasion through informal credit instruments. By mandating the use of account payee cheques or specified modes, they ensure greater transparency and accountability in financial transactions. Clause 106, with its broader scope, reflects a forward-looking approach, adapting to the evolving financial landscape. These provisions underscore the importance of formalizing financial transactions to enha .....

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