Income-tax law | Search and block assessment

Section 158BB: Computation of Undisclosed Income of the Block Period

A practical explanation of the computation of undisclosed income discovered in search or requisition cases, including the Finance Act, 2025 amendments and the treatment of disclosed income, evidence, losses and deductions.

Legal status (26 October 2026): The older text reproduced on this page related to the historical Chapter XIV-B block assessment regime. A revised Chapter XIV-B was introduced for searches initiated or requisitions made on or after 1 September 2024. The Finance Act, 2025 substantially revised section 158BB with retrospective effect from that date. For the Income-tax Act, 2025 framework applicable from 1 April 2026, consult the corresponding block-assessment provisions, including section 293, and the applicable transitional and saving rules.

What is Section 158BB?

Section 158BB of the Income-tax Act, 1961 sets out how total undisclosed income of a block period is determined for a search or requisition assessment under Chapter XIV-B. A block period is the statutory period covered by the search assessment; its boundaries depend on the law applicable to the date of search or requisition. Undisclosed income generally concerns income or assets not disclosed, or not likely to have been disclosed, for tax purposes, as defined in section 158B.

The relevant framework must be selected by the date of initiation of search or requisition. Do not apply the former 1995-2003 block assessment computation mechanically to newer searches.

Section 158BB(1): Computation after the Finance Act, 2025

The amended subsection (1) provides a direct aggregation of two amounts:

Component	Treatment
Undisclosed income declared in the block return under section 158BC	Included in the block-period total
Undisclosed income determined by the Assessing Officer under section 158BB(2)	Added to the amount declared, without double counting
Total undisclosed income	Sum of the above components, subject to statutory exclusions and adjustments

The Finance Act, 2025 replaced the earlier indirect approach of aggregating total income and subtracting disclosed income. The amendment operates retrospectively from 1 September 2024. The statutory text and effective date should be checked for the particular proceeding.

Section 158BB(1A): Income excluded from undisclosed income

Subsection (1A) prevents specified income already disclosed or appropriately recorded from being treated as undisclosed income merely because a search took place. It covers, subject to the detailed conditions:

Income already determined or assessed before the search under specified provisions, including sections 143, 144, 147, 153A, 153C, 158BC and 245D.
Income declared in returns filed before the search under section 139 or in response to section 142(1), where not already covered by the assessment category.
Income evidenced by ordinary-course books and documents for relevant unexpired return-filing periods and the specified portions of the search year, subject to the Assessing Officer's power to recompute an amount considered undisclosed.
Certain income covered by sections 115A(5), 115G and 194P(1), where the prescribed conditions apply.

The dates on which entries were recorded and returns or assessments were completed can be decisive. Retain contemporaneous books, return acknowledgements, statements and supporting documents.

Evidence, transactions, set-off and tax

Section 158BB(2): Evidentiary basis

Undisclosed income is computed under the Act using evidence found during search, survey or requisition and other material or information available to the Assessing Officer or coming to notice during Chapter XIV-B proceedings. An addition should be examined against the applicable statutory definition and evidentiary record.

Section 158BB(3): International and specified domestic transactions

Income relating to an international transaction or specified domestic transaction referred to in section 92CA for the specified part-period connected with execution of the last search authorisation is excluded from the block computation and dealt with under the other applicable assessment provisions.

Section 158BB(4) and related provisions

The section contains further computation rules, including the application of specified provisions concerning unexplained credits, investments, money and expenditure, and other statutory adjustments. Their precise application depends on the operative text and facts.

Section 158BB(7): Brought-forward losses

Brought-forward losses from before the first previous year in the block period and unabsorbed depreciation cannot be set off against undisclosed income determined in the block assessment. Eligible amounts may be carried forward subject to the conditions and remaining permitted period under the Act.

Under section 158BA(7), read with section 113 of the 1961 Act, block-period undisclosed income is taxed at the special statutory rate; the Income Tax Department describes that rate as 60%, subject to applicable surcharge and cess rules.

Historical Section 158BB: Earlier computation method

Under the earlier Chapter XIV-B scheme, the undisclosed income of the block period was broadly determined by aggregating income attributable to the block period on the basis of search-related evidence and reducing income already disclosed, returned or assessed according to the categories in the former section 158BB(1).

The former clauses addressed concluded assessments under sections 143, 144 and 147; returns filed without completed assessments; cases where the return-filing due date had passed without a return; periods where the previous year or filing deadline had not ended; settlement orders under section 245D; and earlier block assessments under section 158BC.

The former Explanation also addressed computation of losses and deductions, partner remuneration in firm cases, and assessments under section 143. Former subsection (2) applied sections 68, 69, 69A, 69B and 69C; former subsection (3) placed on the assessee the burden of proving earlier disclosure; and former subsection (4) restricted set-off of brought-forward losses and unabsorbed depreciation against block undisclosed income.

This historical wording is relevant when interpreting proceedings governed by that earlier regime. For the archived statutory version, see the Income Tax Department's earlier Section 158BB text.

Illustrative calculation

Assume a block return declares Rs. 12 lakh as undisclosed income and the Assessing Officer identifies a further Rs. 8 lakh of distinct, supportable undisclosed income. If no exclusion or other adjustment applies, the total under subsection (1) is Rs. 20 lakh. Income already properly disclosed in a pre-search return is not simply added again. This illustration does not determine tax, surcharge, interest or penalties.

Official legislation and guidance

Updated 26 October 2026. This article provides general statutory information, not advice for a particular assessment. Check the applicable enactment, amendments, commencement provisions and judicial decisions for the relevant search date.