Under Section 56(2)(X) of Income tax Act

[Ethirajan Parthasarathy]

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)

AI Summary

Waiver of debt may constitute income under deemed-income rules and is taxable in the year the loan proceeds were received.
A bank's waiver of a borrower's obligation may be treated as equivalent to a sum of money only in respect of loan proceeds actually received, so any charge under the deemed-income provision arises, at most, in the year those proceeds were received; procedural limits on reopening past years often preclude taxing the waiver in a later year.