Section 195 - Tax on income referred to in sections 102 to 106
The section covers unexplained cash credits, investments, money, expenditure and other prescribed unexplained amounts. The source, evidence and return disclosure determine exposure beyond the rate itself.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Current law and effective date
Section 195 is controlled against the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The Act and Income-tax Rules, 2026 operate from 1 April 2026; earlier years and saved proceedings require the repeal-and-savings framework rather than automatic migration.
Primary statute: Income Tax Department consolidated Act | Rules: Notified Income-tax Rules, 2026
Finance Act 2026 amendment source: Official Notes on Clauses / amendment materials
2-minute decode
The section covers unexplained cash credits, investments, money, expenditure and other prescribed unexplained amounts. The source, evidence and return disclosure determine exposure beyond the rate itself.
Who should use this section
Taxpayers with income deemed or determined under sections 102 to 106, whether disclosed in the return or determined in assessment.
Old-law bridge
section 115BBE
The old-law bridge is navigational, not automatic precedent transfer. Match the 1961 Act wording, saved proceedings, current 2025 Act text and effective date before importing an older interpretation.
Finance Act 2026 / current-law note
Finance Act, 2026 reduced the special tax rate on income referred to in sections 102 to 106 from 60% to 30% with effect from 1 April 2026. The no-deduction and no-loss-set-off architecture remains separately relevant.
Professional alert
Reconcile cash credits, investments and expenditure to source evidence. Flag returned versus assessed unexplained income separately. Prevent loss or deduction engines from reducing the special bucket.
Connected Income-tax Rules, 2026 and Forms
| Rule | Current control | Form |
|---|---|---|
| No provision-specific Rule/Form is directly prescribed for this section in the mapping used here. Apply the statute directly and check the current Rules where another provision cross-refers to them. | ||
Worked application
An unexplained investment of ₹8 lakh is determined under section 103. It enters the 30% special-rate bucket without expense deduction or loss set-off.
Evidence / compliance checklist
- Reconcile cash credits, investments and expenditure to source evidence (section 195 evidence control 1).
- Flag returned versus assessed unexplained income separately (section 195 evidence control 2).
- Prevent loss or deduction engines from reducing the special bucket (section 195 evidence control 3).
Common mistake
A common section 195 error is to apply the old-law label or headline rate without rebuilding the current statutory conditions. For “Tax on income referred to in sections 102 to 106”, the safer control is to test the exact taxpayer/transaction facts, the operative tax year, every linked Rule/Form and the Finance Act 2026 consolidated wording. Reconcile cash credits, investments and expenditure to source evidence. Flag returned versus assessed unexplained income separately. Prevent loss or deduction engines from reducing the special bucket.
Recommended approach
For section 195, start with the legal trigger in “Tax on income referred to in sections 102 to 106”, document the evidence for that trigger, then run the computation or procedural step against the current text. As a cross-check, verify this provision-specific checkpoint: Income under sections 102 to 106: 30% from 1 April 2026 after Finance Act 2026.
Thresholds, periods and timing checkpoints
- Income under sections 102 to 106: 30% from 1 April 2026 after Finance Act 2026.
- No expenditure / allowance deduction or loss set-off against the special bucket, subject to the exact section.
Related provisions and interaction map
Section 195 operates inside Chapter XIII special-rate computation; reconcile its particular tax bucket with the relevant capital-gains, unexplained-income or corporate-regime rules, plus surcharge, cess, return and loss-set-off provisions.
Provision summary - verify verbatim text in the official Act
Text-status note: This guide does not reproduce the complete verbatim provision for section 195. Use the linked official consolidated Act before quoting sub-section language or preparing a filing, opinion or litigation document.
Primary-source trail
Statute: Income-tax Act, 2025 as amended by Finance Act, 2026
Rules: Income-tax Rules, 2026
Law navigation: Income Tax Department 2025 Act / Rules hub
Quoting note: Use the official consolidated Act for verbatim legislative language.
FAQs
Does an old Income-tax Act, 1961 case automatically decide section 195?
No. The old-law bridge helps research, but transferability depends on materially matching language, transition rules and any Finance Act 2026 change.
Which text should be quoted in advice or litigation?
Quote the consolidated official statute for the relevant tax year. If this page presents a provision summary rather than complete statutory text, use the official consolidated Act for verbatim legislative language.