Microlesson · 5-min read

Taxation of Unexplained Money / Investments (Section 115BBE)

# Taxation of Unexplained Money, Investments, etc. (Section 115BBE)

Where income is assessed as deemed income under sections 68, 69, 69A, 69B, 69C or 69D (unexplained cash credits, investments, money, expenditure, etc.), it is taxed under the punitive regime of section 115BBE.

## Tax Computation

Aspect	Treatment
Tax rate	60%
Surcharge	25% of the tax
Effective rate	78% = 60% tax + 25% surcharge + 4% cess on (tax + surcharge)
Basic Exemption Limit	No BEL allowed against such income
Allowances / Expenditure	No deduction of any allowance or expenditure
Set-off of losses	No set-off of any loss against income taxed u/s 68–69D

## Why the 78%?

Walk the cess through step-by-step:

Tax = 60%
Surcharge = 25% of 60 = 15%
Sub-total = 75%
Cess = 4% of 75 = 3%
Total = 78%

Worked example

### Example 1

Effective tax on ₹10,00,000 unexplained credit: Tax @60% = ₹6,00,000. Surcharge @25% = ₹1,50,000. Subtotal = ₹7,50,000. Health & Education cess @4% = ₹30,000. Total tax = ₹7,80,000 (78%). No BEL, deduction or loss set-off is allowed.

⚠️ Common exam mistakes

Allowing the basic exemption limit against unexplained income — it is fully taxed with no BEL.
Setting off business losses or other losses against income assessed u/s 68–69D.
Applying normal surcharge slabs instead of the flat 25% surcharge specific to 115BBE income.
Forgetting to add 4% cess on top of (tax + surcharge), which is what produces the 78% effective rate.

Reference: 115BBE

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