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Case law › Income-tax Act 2025 › Chapter VI › Section 102
Chapter VIwas s.68

Section 102 of the Income-tax Act, 2025

Section 102 — Unexplained credits. Successor to s.68 of the 1961 Act.

Where this section sits

Section 102 is in Chapter VI — Aggregation of Income, which runs from section 101 to section 107.

← Section 101  ·  Section 103 →

What this section does

Sub-section (1) charges an unexplained credit: where a sum is found credited in the books of an assessee maintained for any tax year and the assessee offers no explanation about its nature and source, or the explanation is not satisfactory in the Assessing Officer's opinion, the sum is charged to income-tax as the assessee's income of that tax year.

Sub-section (2) tightens this for a loan or borrowing or any such amount, by whatever name called: the explanation is deemed not satisfactory unless the person in whose name the credit is recorded also explains the nature and source of the sum, and that explanation is found satisfactory. Sub-section (3) does the same where the assessee is a company in which the public are not substantially interested and the credit consists of share application money, share capital, share premium or any such amount, with the added requirement that the person in whose name it stands be a resident.

Sub-section (4) takes out of sub-sections (2) and (3) any case where that person is a venture capital fund or venture capital company referred to in Schedule V (Table: Sl. No. 6).

Why it is there

Money entering a business through the books as a loan or as share capital arrives untaxed, and its true source is known only to the person who sent it. Sub-section (1) puts the burden on the assessee; sub-sections (2) and (3) go further for the two routes most used to bring unaccounted money in, by requiring the creditor or subscriber to explain his own funds. The carve-out keeps regulated pooled investment out of that second layer.

Who it applies to

What this means in practice

Producing the lender's name, identity and bank statement answers sub-section (1) but not sub-sections (2) and (3), which require a second explanation from the creditor or subscriber about where his own money came from, satisfactory to the Assessing Officer. The two heightened rules differ in reach: sub-section (2) covers a loan, borrowing or similar amount for any assessee, while sub-section (3) covers share money in a closely held company and additionally requires the person named to be a resident, so a credit standing in a non-resident's name cannot be saved that way. The amount is charged as income of the tax year whose books show the credit, whatever the entry is called on the balance sheet.

An example

Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.

A closely held company credits Rs 3 crore of share premium received from an investor. It produces the allotment records, the investor's confirmation and the banking trail, but the investor does not explain where his own money came from. Under sub-section (3) the company's explanation is deemed not satisfactory, and the Rs 3 crore is charged as its income of that tax year even though it sits in the books as capital.

Where you meet this section

In a scrutiny assessment, through a notice asking for the nature and source of specific credits in the books, and in the addition made in the assessment order. The lender or subscriber may separately be asked to explain his own source, since the assessee's position depends on that explanation.

The words themselves

the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited
Section 102(2)(a), Income-tax Act, 2025.

What people get wrong

What this replaced, and what changed

1961 provisionWhat changed in the move
s.681. The charging verb changes from permissive to mandatory. Section 68 said the sum 'may be charged to income-tax'; s.102(1) says it 'shall be charged'. The discretion that the older word left the Assessing Officer - and on which a body of case law turned - is gone on the face of the section. 2. The marginal heading changes from 'Cash credits' to 'Unexplained credits', which better matches what the section always covered, since it was never confined to cash. 3. The three provisos become numbered sub-sections (2), (3) and (4), so the second-tier burden is no longer a proviso to be read down against the main provision but a free-standing rule. 4. 'any explanation offered by such assessee' becomes 'the explanation offered by such assessee' in both special cases - a tightening of expression rather than of substance. 5. The exemption for venture capital funds and companies is re-pointed from s.10(23FB) to Schedule V (Table: Sl. No. 6). 6. The section is now grouped with unexplained investment, asset, expenditure and hundi borrowings as ss.102 to 106 in Chapter VI, and taxed by a single provision, s.195, instead of s.115BBE.

How we established this. Read s.102 of the 2025 Act against s.68 of the 1961 Act. The operative sentence is the same sentence, reorganised into clauses: 1961 - 'Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year'; 2025 - the same words with 'tax year' for 'previous year' and the two failure limbs split into clauses (a) and (b). The first proviso to s.68 (loans and borrowings) reappears verbatim in substance as s.102(2), including the two lettered conditions; the second proviso (share application money, share capital, share premium in a company in which the public are not substantially interested, the creditor being a resident) reappears as s.102(3) with the same two lettered conditions; the third proviso (venture capital fund or venture capital company) reappears as s.102(4), with the reference to s.10(23FB) replaced by Schedule V (Table: Sl. No. 6). This confirms the mapping s.68 to s.102 that earlier work in this pass had provisionally recorded.

Circulars of the Board on this section

A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.

See the circulars index.

Notifications that reach this section

A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.

See the notifications index.

Case law carried across

Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 102. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.

Explainers

Read with

What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.