Section 69D of income tax of India is about amount borrowed or repaid on Hundi. From the assessment year 1977-78 and onwards any borrowing on a hundi or any repayment of hundi loan including interest thereon should be done through an account payee cheque on a bank or any other mode of banking, failing which the amount borrowed or repaid is deemed to be income of the person who is borrowing or repaying during that previous year.
Any other mode of banking includes Demand draft which is also treated as a cheque in income tax point of view in section 69D of income tax.
What is hundi transaction: - these are the characters of the hundi transactions.
- A hundi loan is normally in oriental language.
- There are three parties in hundi, the drawer, drawee and the payee. The drawer himself can’t be the drawee.
- A hundi is payable to a person or order but negotiable without endorsement by the payee. The holder of hundi is entitled to sue on its basis without any endorsement in his favour.
- The owner can claim repeat from the drawer and present the same to the drawee for claiming the payment.
Thus where an assessee borrowed amount of Rs. 210000 from more than one party by account payee cheque but the repayment including interest were made in cash, the income tax officer cannot make an addition of Rs. 210000 under section 69D[CIT vs. Dexan Pharmaceuticals Pvt Ltd. (1995) 214 ITR 576(AP)].
Hundies are generally in desi language and there is no name in foreign language. However, a lot of business is made in India through hundies.
Generally hundi means if some need to pay amount in Mumbai, but he is in Delhi. He generally pay the Mumbai person through hundi, either paying some commission or free. So it creates very easy for the tax-evasion as well as save all types of tax such as sales tax, income tax and excise.
Tags-section 69d of income tax,section 69d of income tax act,income tax section 69d,income tax on hundi,hundi treatment in income tax