A firm has ₹10 lakh of unexplained investment chargeable under section 195 in tax year 2026–27, with ₹5 lakh of brought-forward losses and ₹2 lakh of current business losses. Before surcharge, cess…
Question and options
A firm has ₹10 lakh of unexplained investment chargeable under section 195 in tax year 2026–27, with ₹5 lakh of brought-forward losses and ₹2 lakh of current business losses. Before surcharge, cess and penalty, what tax is payable on the unexplained amount?
₹90,000
₹3,00,000
Nil
₹6,00,000
Answer and explanation
Section 195(1) of the Income-tax Act, 2025, as amended by the Finance Act, 2026, taxes unexplained income such as an unexplained investment at 30% for tax year 2026-27, and section 195(2) bars any deduction or set-off of losses against it; 30% of ₹10 lakh is ₹3 lakh. ₹6 lakh reflects the earlier 60% rate, which no longer applies.
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