An individual has defaulted in repaying Bank Loan. Later one time payment is settled and the barrower was asked to pay only let us say 2 crore as against outstanding demand of ₹ 3.5 crores.
Whether the sum of ₹ 1.5 crores waived by the Bank will be treated as his income U/s 56(2)(X)
Tax Implications of Bank Loan Waiver Under Section 56(2)(X) Analyzed; Supreme Court Ruling Indicates Non-Taxability An individual inquired about the tax implications under Section 56(2)(X) of the Income Tax Act regarding a bank loan waiver. The bank waived 1.5 crores from an outstanding demand of 3.5 crores after a one-time settlement. A respondent referred to a Supreme Court decision in Commissioner v Mahindra and Mahindra Limited, indicating such waivers are not taxable under sections 28(iv) and 41(1). Regarding Section 56(2)(X), the waiver could be considered money received, but taxation may be limited to the year the loan was initially received, potentially beyond the notice period for tax authorities. (AI Summary)
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