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Benami fund routing requires proof of consideration, holding and benefit; formal invoices alone may not establish genuine commercial credits.
Benami character under Section 2(9)(A) depends on the real relationship between the property holder, provider of consideration and intended beneficiary. Cash deposits routed through entities linked to an alleged benamidar and transferred by RTGS may support an inference of beneficial ownership when formal invoices, ledgers and tax records lack independent commercial corroboration. Bank funds and proceeds fall within the broad concept of property. Sworn statements, banking records and surrounding circumstances must be assessed together; the party alleging benami bears the initial burden, though evidentiary burdens may shift on proved facts.

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Comparison of section 343 "Deemed accumulated income." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

11 September, 2025

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Section 343 Deemed accumulated income.

Income-tax Act, 2025

At a Glance

The provided texts comprise two versions of a statutory provision titled "Deemed accumulated income" dealing with registered non-profit organisations: (a) Clause 343 of the Income Tax Bill, 2025 (Old Version) and (b) Section 343 as enacted in the Income-tax Act, 2025. They address calculation of a portion of regular income treated as "deemed accumulated income" and prescribe investment/deposit modes. The changes alter the reference points for reductions and slightly modify the obligation to invest. Affected parties are registered non-profit organisations and the tax department; no explicit effective date is stated in the documents.

Background & Scope

Statutory hooks: both texts are framed as Clause/Section 343 within the Income Tax Bill/Act, 2025, and they interact with sections 341, 342 and 350 as referenced. The subject matter is the taxation/administration of income of registered non-profit organisations - specifically a deemed accumulation rule. The documents provide no further definitions or explanatory notes beyond the clause text itself.

Statutory Provision Mode

Text & Scope

  • Both versions provide a two-paragraph provision. Core content in the Old Bill (Clause 343) is: (1) The regular income, reduced by the application of income and accumulated income u/s 342, to the extent of 15% of regular income, shall be considered deemed accumulated income and shall be invested or deposited in any of the modes permitted u/s 350; (2) such deemed accumulated income shall not be considered accumulated income for purposes of section 342.
  • The enacted Section 343 alters the text as follows: (1) Regular income is reduced by application of income "as per the provisions of section 341 and accumulated or set apart income u/s 342," to the extent of 15% of regular income, and "where such deemed accumulated income is invested or deposited, it shall be invested or deposited in any of the modes permitted u/s 350"; (2) the same exclusion from section 342 is retained.
  • Coverage: The provision establishes an amount equal to 15% of regular income (subject to stated reductions) as "deemed accumulated income" for registered non-profit organisations, and addresses investment/deposit modalities and non-treatment as accumulated income u/s 342.

Interpretation

The texts supply limited interpretive guidance. Legislative intent can only be partially inferred from word choice differences. The Bill's language appears to mandate that the deemed amount "shall be invested or deposited" in modes u/s 350. The enacted section softens that imperative by qualifying it: "where such deemed accumulated income is invested or deposited, it shall be invested or deposited in any of the modes permitted u/s 350." That change suggests a legislative choice to avoid imposing an absolute duty to invest the deemed amount - instead constraining the manner of investment if the amount is in fact invested or deposited. The enacted text also adds an express cross-reference to section 341 regarding "application of income," and inserts the phrase "set apart" when referencing income u/s 342; these additions refine the base from which the 15% is calculated.

Exceptions/Provisos

No separate provisos, exceptions, thresholds or timing conditions are included in either text beyond the 15% quantification and the exclusion in paragraph (2). No transitional, compliance, or penalty provisions are stated.

Interplay

Both texts expressly cross-refer to sections 341, 342 and 350. The Bill text references only section 342 for reductions and section 350 for investment modes. The enacted section explicitly references section 341 for "application of income" and expands the description of section 342 to include "accumulated or set apart income." The enactment conditions the requirement to use modes u/s 350 on an actual investment/deposit taking place. The documents do not quote sections 341, 342 or 350; thus specifics of those interactions beyond the referral language are not stated in the documents.

Practical Implications

  • Compliance and risk areas: The Bill's mandatory language ("shall be invested or deposited...") imposes a clear duty to invest the deemed 15% in section 350 modes, potentially exposing organisations to compliance risk if they do not invest. The enacted wording shifts to a conditional statement, which may reduce the risk of finding a formal failure strictly on the basis that the deemed amount was not invested, while still restricting allowable investment modes where an organisation does invest or deposit the amount. This is a material compliance distinction for administrators and practitioners assessing mandatory obligations versus permitted actions.
  • Calculation base: The enacted addition of section 341 as a reduction point and the express inclusion of "set apart" income u/s 342 clarifies (relative to the Bill) the items that reduce the regular income before applying the 15% test. This narrows uncertainty about whether application u/s 341 reduces the base for deemed accumulated income; under the enacted text, it explicitly does. Practitioners will need to consult section 341 and section 342 to determine which amounts are deductible for computing the 15% base.
  • Record-keeping/evidence: Given the provision's focus on application/set-aside and investment/deposit, organisations should maintain contemporaneous records documenting (a) amounts applied pursuant to section 341, (b) amounts accumulated or set apart u/s 342, (c) the computation of the 15% deemed amount, and (d) evidence of any investment/deposit and the mode used (to show compliance with section 350 if an investment/deposit occurs). The documents do not specify particular forms or timelines for such records, so general good record-keeping is implied but not mandated in the text.

Key Takeaways

  • Both texts create a deemed accumulated income equal to 15% of regular income subject to certain reductions and exclude that deemed amount from the operation of section 342.
  • The Old Bill mandated that the deemed amount "shall be invested or deposited" in modes u/s 350; the enacted section qualifies that requirement by making the section 350 constraint applicable "where such deemed accumulated income is invested or deposited."
  • The enacted text expressly references section 341 and refers to "accumulated or set apart income" u/s 342 as reductions, whereas the Bill referenced only section 342 in the reduction context.
  • The enacted change narrows the instances in which an absolute investment duty can be asserted and clarifies the deduction base, affecting compliance obligations and potential challenges.
  • No procedural, effective date, penalty, or illustrative examples are provided in either document; these details are "Not stated in the document."

Differences between the Provisions and Practical Impact

  • Textual difference on reduction of regular income: Bill - "reduced by the application of income and accumulated income u/s 342"; Act - "reduced by the application of income as per the provisions of section 341 and accumulated or set apart income u/s 342."
    • Practical impact: The Act clarifies that application u/s 341 affects the base and expressly captures amounts "set apart" u/s 342, reducing ambiguity about what reduces regular income for the 15% calculation. Practitioners must therefore examine both sections 341 and 342 to compute the base accurately.
  • Obligation to invest/deposit: Bill - mandatory phrasing ("shall be invested or deposited in any of the modes permitted u/s 350"); Act - conditional phrasing ("where such deemed accumulated income is invested or deposited, it shall be invested or deposited in any of the modes permitted u/s 350").
    • Practical impact: The Bill creates a clearer, potentially enforceable duty to invest the deemed amount in specified modes, increasing compliance exposure. The Act appears to limit enforcement to cases where an investment/deposit actually occurs, allowing for circumstances where the deemed amount may remain uninvested without triggering the specific investment-mode requirement (though tax consequences from non-investment, if any, are not stated).
  • Terminology refinement: Act adds "set apart" and cross-references section 341; Bill lacks those specific descriptors.
    • Practical impact: Semantic refinement can alter scope of deductible/offset amounts and may affect disputes over what constitutes "accumulated" versus "set apart" income; the Act's explicit language reduces interpretive disputes by calling attention to both concepts.

Action Points

  • Review and apply sections 341 and 342 to calculate the reduction base before computing the 15% deemed accumulated income (Act text requires consideration of section 341; Bill text does not expressly do so).
  • Maintain detailed records documenting any application, accumulation, or set-aside of income and the computation of the deemed 15% amount, and evidence of any investment/deposit and the mode used u/s 350, since the statute conditions acceptable modes on a deposit/investment occurring.
  • Where an organisation intends to invest/deposit the deemed amount, ensure the chosen mode aligns with section 350; if uncertain, consult section 350 text (not provided here) for permitted instruments.
  • Monitor whether authorities treat failure to invest the deemed amount as a breach in light of the enacted conditional language; the documents contain no penalty or remedial mechanism, therefore "Not stated in the document."

Full Text:

Section 343 Deemed accumulated income.

Topics

Acts Income Tax