Section 107: charge of tax

Introduction

Section 107 connects the income described in sections 102 to 106 with the special charging rule in section 195. The five preceding sections address specified unexplained amounts and certain borrowing or repayment through a negotiable instrument or hundi.

This section does not itself state a tax rate. For the applicable charge and computation, section 195 of the currently amended Act must be read together with the provision that brings the amount into income.

Key takeaways

What Section 107 says

Income referred to in Sections 102, 103, 104, 105 and 106 is charged to tax as per the provisions of Section 195.

When this provision applies

Use a two-stage analysis: establish the source provision and amount under Sections 102–106, then apply Section 195 to that income. Section 107 supplies the link; it does not allow the underlying statutory conditions to be bypassed.

Section 195 covers the specified income reflected in the return and the specified income determined by the Assessing Officer that is not covered by the return limb. It also separates tax on that income from tax on the remaining total income.

Limits and procedural safeguards

The currently amended Section 195(1)(i) states a 30% base rate for the specified income. Do not import an old rate from the 1961 Act or treat the base calculation as a complete final liability including every possible surcharge, cess, interest or penalty.

Section 195(2) bars expenditure or allowance deductions and loss set-off in computing the specified income. Ordinary expense or brought-forward-loss treatment should not be applied without addressing that express restriction.

Step-by-step review

1. Identify the relevant Section 102, 103, 104, 105 or 106 and establish its conditions.

2. Determine the amount and tax year, avoiding unexplained duplication across the source provisions.

3. Separate that income from the remaining income in the Section 195 computation and apply its deduction and loss restrictions.

4. Compute the applicable base tax and assess any other levy under its own legal provision.

Hypothetical example

Hypothetical illustration: ₹2,00,000 has validly been brought into income under one of Sections 102–106. Under the current Section 195(1)(i), the base tax on that amount is ₹60,000 at 30%. Tax on any remaining income and other applicable components require separate calculation; the example does not decide a penalty or final all-inclusive demand.

Records to prepare

The source-section analysis, supporting evidence and amount determined.

The relevant return or assessment record and the tax year.

A separate Section 195 computation, including the deduction and loss-set-off restriction.

Official amended Act source

• Income-tax Act, 2025 as amended by Finance Act, 2026: Section 107 and related provisions

Step-by-step flow for applying Section 107

1. 1

   Is the income deemed under Section 102, 103, 104, 105 or 106?

   • No: Section 107 does not apply; tax the income under its normal head and rates.
   • Yes: Go to the next step.
2. 2

   Are the conditions of that source section actually met?

   Section 107 only links the income to the charging provision. The amount and tax year must first be established under the relevant section among Sections 102 to 106.

3. 3

   Separate the specified income from the rest of total income

   Keep each deemed amount, its source section and tax year in a separate schedule, and avoid counting the same money under two source sections.

4. 4

   Charge the tax as per Section 195

   Apply Section 195 to the specified income, including its restrictions, and compute tax on the remaining income separately.

Practical checklist

Glossary

Deemed income

An amount brought into income under one of Sections 102–106.

Charging cross-reference

A direction to apply another section's tax treatment to the listed income.

Base tax

The income-tax calculated at the stated rate before separately examining other applicable components.

Frequently asked questions