TaxTMI 
TaxTMI 
TaxTMI 
Curb tax evasion through Unexplained Credits (i.e. unaccounted money or fictitious entries in financial records) in Clause 102 of The Income Tax Bill, 20205 Vs. Section 68 of The Income Tax Act, 1961
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....an assessee is deemed unexplained and, consequently, included in the total taxable income. The provision reflects a legislative intent to curb tax evasion through unaccounted money or fictitious entries in financial records. Objective and Purpose The primary objective of Clause 102 is to ensure that all credits in the books of an assessee are backed by satisfactory explanations regarding their nature and source. This clause serves as a deterrent against the use of unaccounted funds and fictitious transactions to evade taxes. By mandating a satisfactory explanation from both the assessee and the person in whose name the credit is recorded, the provision seeks to enhance the integrity of financial disclosures. The clause also aligns with br....
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....n (2), it requires explanations from both the company and the individual in whose name the credit is recorded. This provision aims to prevent the misuse of share capital as a means of introducing unaccounted money into companies. It reflects a policy shift towards greater scrutiny of corporate financial practices. Exemption for Venture Capital Funds Sub-section (4) provides an exemption for venture capital funds and companies, recognizing their unique role in financing and innovation. This exemption acknowledges the legitimate use of unexplained credits in venture capital activities and avoids stifling investment in high-risk ventures. However, it also implies a need for careful monitoring to prevent abuse of this exemption. Practical I....
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....lause 102 introduces specific provisions for loans, borrowings, and share capital, which are not explicitly detailed in Section 68. 2. Requirement of Dual Explanation: Clause 102 explicitly mandates explanations from both the assessee and the person in whose name the credit is recorded, particularly for loans and share capital. Section 68, while requiring explanations, does not explicitly state the need for dual explanations, making Clause 102 more stringent in this regard. 3. Exemptions for Venture Capital: Clause 102 provides a specific exemption for venture capital funds and companies, recognizing their unique nature. Section 68 does not contain such specific exemptions, indicating a more generalized approach. 4. Legislative Intent....