Income Tax Law • Updated 25 October 2026
Section 69D of Income-tax Act, 1961: Hundi Loans and Repayments
Understand when a hundi borrowing or repayment is treated as deemed income, the account-payee cheque condition, protection against double assessment, and the wider Section 106 rules under the Income-tax Act, 2025.
What is a hundi?
A hundi is a traditional Indian financial or negotiable instrument used in commercial credit, borrowing, payment or remittance arrangements. Whether a particular document is a hundi depends on its terms, commercial usage and the facts. A normal loan does not become a hundi transaction merely because money was borrowed in cash.
Section 69D of the Income-tax Act, 1961: Meaning and legal conditions
Under Section 69D, where a person borrows an amount on a hundi from another person, or repays an amount due on a hundi to another person, otherwise than through an account-payee cheque drawn on a bank, the amount borrowed or repaid is deemed to be the income of the person borrowing or repaying for the relevant previous year.
Proviso: No second assessment of the same amount
Where an amount borrowed on a hundi has already been deemed income of a person under Section 69D, that person cannot be assessed again under the same section in respect of that amount merely when it is repaid. This safeguard applies to the amount already brought to tax under this section; the treatment of interest and other amounts must be examined separately.
Explanation: Interest is included in repayment
The statutory Explanation expressly provides that an amount repaid includes interest paid on the borrowed amount. Consequently, the repayment provisions are not confined to repayment of principal.
The section was introduced by the Taxation Laws (Amendment) Act, 1975, with effect from 1 April 1977. See the official text of Section 69D.
Section 106 of the Income-tax Act, 2025
Section 106(1), headed Amount borrowed or repaid through negotiable instrument, hundi, etc., broadens the rule to specified borrowing or repayment through a negotiable instrument or on a hundi, otherwise than an account-payee cheque, or through a mode specified by the Central Board of Direct Taxes (CBDT). The amount, including applicable interest, is deemed income of the person borrowing or repaying in the tax year concerned.
Section 106(2) protects against a second assessment of the same amount on repayment if that borrowed amount has already been deemed income under Section 106(1). The new text should be read carefully, including any prescribed modes and notifications applicable to the transaction date.
For the enacted wording, see the official Income-tax Act, 2025 (PDF) and the Income Tax Department's 2025 Act portal.
| Topic | Section 69D (1961 Act) | Section 106 (2025 Act) |
|---|---|---|
| Subject | Hundi borrowing or repayment | Specified negotiable instruments and hundi transactions |
| Payment rule | Account-payee cheque drawn on a bank | Account-payee cheque or applicable CBDT-specified mode, subject to statutory wording |
| Interest | Included in repayment by Explanation | Expressly addressed in subsection (1) |
| Double taxation | Proviso prevents reassessment of the same borrowed amount on repayment | Subsection (2) provides corresponding protection |
Practical illustrations
Example 1: Hundi borrowing without account-payee cheque
A trader borrows Rs. 5,00,000 on a hundi and receives the amount in cash in a year governed by the 1961 Act. Subject to the transaction being established as a hundi, Section 69D may deem Rs. 5,00,000 to be the trader's income for that previous year. The rule is not restricted to cases where the source of the money is otherwise unexplained.
Example 2: Repayment and the proviso
Assume Rs. 5,00,000 was already assessed as deemed income of the borrower under Section 69D when borrowed. Repayment of that same principal does not trigger a second assessment under Section 69D. Any interest paid requires separate consideration under the statutory Explanation.
Example 3: Ordinary loan rather than hundi
A loan made by bank transfer under an ordinary loan agreement is not automatically a hundi. Classification requires examination of the instrument and surrounding facts; other provisions governing cash transactions or unexplained credits may nevertheless be relevant.
Tax consequences and related provisions
For relevant assessments under the 1961 Act, deemed income under Section 69D is covered by Section 115BBE, which generally prescribes a 60% income-tax rate on specified deemed income, with applicable surcharge and cess; restrictions on deductions and set-off also apply. The effective liability depends on the year, applicable statutory provisions and facts. Penalty provisions, including Section 271AAC where applicable, must be assessed independently and are not automatic in every case.
Under the 2025 Act, consult Sections 106 and 107 and the applicable charging, rate and penalty provisions rather than assuming the older section numbers or outcomes remain unchanged.
Records and precautions for taxpayers
- Retain the original hundi or negotiable instrument and related endorsements.
- Maintain agreements, ledgers, bank statements and proof of the actual mode of borrowing and repayment.
- Preserve separate records of principal, interest and dates of each transaction.
- Check whether the amount has already been assessed under the same deeming provision to avoid duplicate assessment.
- Review the law applicable to the relevant previous year or tax year, including CBDT notifications.
Official legal references
- Income Tax Department: Section 69D, Income-tax Act, 1961
- Income Tax Department: Income-tax Act, 2025 (Section 106)
- Income Tax Department: 2025 Act, Rules and transition resources
This article is for general legal information. The outcome of an assessment depends on the instrument, transaction date, evidence and applicable statutory provisions.