Sub-section (1) applies where the total income of an assessee includes income referred to in section 102, 103, 104, 105 or 106 — either because that income is reflected in the return of income furnished under section 263 (clause (a)), or because the total income determined by the Assessing Officer includes such income where it is not covered by clause (a) (clause (b)). In either case the income-tax payable is the aggregate of two amounts: income-tax calculated on that income at the rate of 30%, a figure substituted for "60%" by Act No. 4 of 2026 with effect from 1 April 2026; and the income-tax with which the assessee would have been chargeable had his total income been reduced by that income.
Sub-section (2) overrides the rest of the Act to provide that no deduction in respect of any expenditure or allowance, and no set off of any loss, shall be allowed to the assessee under any provision of the Act in computing the income referred to in sub-section (1)(a) and (b).
Why it is there
The incomes described in sections 102 to 106 are unexplained items brought to charge without any accepted source, and the section taxes them at a flat rate on their gross amount rather than absorbing them into the ordinary slab computation. Sub-section (2) makes the charge flat in substance: no expenditure, allowance or loss may reduce it.
Who it applies to
An assessee whose return furnished under section 263 reflects income referred to in sections 102 to 106
An assessee whose total income as determined by the Assessing Officer includes such income
The Assessing Officer determining total income that includes such income
The figures, and what each one turns on
Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
What
Figure
The condition on it
Where
Rate of income-tax on income referred to in sections 102 to 106
30%
Substituted for "60%" by Act No. 4 of 2026 with effect from 1 April 2026; applied on that income alone, whether it is reflected in the return under section 263 or is determined by the Assessing Officer
Sub-section (1)(i)
What this means in practice
The computation is a two-part sum, not a single rate on total income: the section 102 to 106 income is carved out and taxed at 30%, and the rest is taxed as it would have been had that income never been there. The bite is sub-section (2), expressed to operate irrespective of anything in the Act, so business expenditure, depreciation and brought-forward or current-year losses are all unavailable against the carved-out income. Reporting the item voluntarily does not take it out of the section; it only moves it from clause (b) to clause (a).
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 firm files a return showing business income of Rs. 40 lakh and an unexplained investment of Rs. 1 crore falling within those sections. The Rs. 1 crore is taxed at 30%, that is Rs. 30 lakh, and the Rs. 40 lakh is taxed as if total income were only Rs. 40 lakh. A brought-forward business loss of Rs. 25 lakh may be set off against the Rs. 40 lakh but, under sub-section (2), not against the Rs. 1 crore.
Where you meet this section
It is applied in the assessment order and in the tax computation attached to it whenever an addition is made under any of sections 102 to 106, and it also governs self-assessment where the assessee has reported such income in the return furnished under section 263.
The words themselves
Irrespective of anything contained in this Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in sub-section (1)(a) and (b).
Section 195(2), Income-tax Act, 2025.
income-tax with which the assessee would have been chargeable had his total income been reduced by income referred to in clause (i)
Section 195(1)(ii), Income-tax Act, 2025.
What people get wrong
Applying 60% as the rate. Act No. 4 of 2026 substituted 30% with effect from 1 April 2026.
Setting off a loss against the carved-out income. Sub-section (2) bars any set off of loss and any deduction for expenditure or allowance against it.
Taxing the whole total income at the special rate. Sub-section (1)(ii) taxes the balance at the rates that would have applied had total income been reduced by that income.
Assuming that reporting the item in the return avoids the section. Clause (a) covers income reflected in the return just as clause (b) covers income determined by the Assessing Officer.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
115BBE - Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D
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.
Circular No. 11/2019 — Clarification regarding non allowability of set off of losses against the deemed income under section 115BBE of the income tax act 2019-06-19
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 195. 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.
Ankit Agarwal v PCCITHigh CourtHelps taxpayertagged s.115BBE My 148A notice says I never filed a return, but I did. Is that enough to get it quashed?
Jagdish Kumar Arora v DCITITATHelps taxpayertagged s.115BBE You surrendered income in a survey. Is it taxed at 60% under s.115BBE, or at your normal rate?
Syed Maqsoodulla v ITOITATHelps taxpayertagged s.115BBE You file under s.44AD. Can cash deposits still be added under s.68 and taxed at the higher rate?
How crypto is taxed in Indiatagged s.115BBE How is crypto taxed in India — what rate, what TDS, what do I report, and what happens when the department writes to me?
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.
