Comparison of Section 106 "Amount borrowed or repaid through negotiable instrument, hundi, etc." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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.... the borrower's or repayer's income for the tax year in which the transaction occurs. The provision matters to taxpayers using negotiable instruments or hundis for lending/repayment, to tax authorities assessing income, and to regulated intermediaries. Effective date or decision date: Not stated in the document. Background & Scope Statutory hooks: Clause 106 (Income Tax Bill, 2025 - Old Version) is located in the aggregation of income provisions (Bills classified under "AGGREGATION OF INCOME"). The clause addresses the treatment of amounts borrowed or repaid via particular instruments-negotiable instruments and hundis-when those transactions are effected otherwise than by an account payee cheque, or through modes that the Board ma....

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....legislature's intent to treat not only principal but also interest components as taxable when transacted by the specified modes. The clause uses mandatory language ("shall be deemed to be the income"), leaving limited discretion at assessment stage to disregard the deeming when the statutory conditions are satisfied. The provision also empowers the Board to specify alternative modes that will attract the deeming rule, implying subordinate legislation or administrative specification may expand the list of covered modes. Legislative intent (as articulated in the explanatory line in the Bill): to capture off-account or informal credit/repayment channels (notably hundis) wherein funds pass outside bank account cheques, thereby preventing ta....

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....stated in the document. Differences between the Section 106 of the Income-tax Act, 2025 and Clause 106 of the Income Tax Bill, 2025 (Old Version) * Wording and scope: The statutory Section 106 (Income-tax Act, 2025) and Clause 106 (Income Tax Bill, 2025 - Old Version) are substantially similar in substance. Both deem amounts borrowed or repaid through a negotiable instrument or a hundi, other than an account payee cheque (or through any mode specified by the Board), to be the income of the person borrowing or repaying in the year of borrowing/repayment. The Act text explicitly adds the phrase "(including interest thereof)" and in subsection (1) the Act repeats "(including interest paid on the borrowed amount)" when describing the income ....

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....tical Implications * Compliance and risk areas: Taxpayers who borrow or repay funds through hundis or non-account-payee negotiable instruments face a risk of those amounts being treated as income in the tax year of transaction. This creates potential timing differences and immediate taxable consequences where such instruments are used. Brokers, moneylenders, and persons dealing in hundis must assess reporting and tax consequences when handling such instruments. The Board's power to specify additional modes may broaden the reach administratively, increasing compliance risk. * Record-keeping/evidence: While the clause does not prescribe records, the deeming effect highlights the practical need for documentary evidence to show lawful f....