Amendments at a glance, Amendments to Income-tax Act - Income Tax - 144/1974

CIRCULAR NO. 144 DATED 9-9-1974 FINANCE (NO. 2) ACT, 1974 Amendments at a glance Amendments to Income-tax Act 17 FINANCE (NO. 2) ACT, 1974 Amendments at a glance Section/Schedule Particulars Income-tax Act 80T Deduction in respect of long-term capital gains in the case of assessees other than companies 2-3A 115 Tax on capital gains in case of companies 3B Amendments to Income-tax Act Finance (No. 2) Act, 1974 Long-term capital gains 2. Under the existing provisions in section 80T and section 115, long-term capital gains, i.e. , capital gains arising from the transfer of a capital asset which is held for more than 60 months from the date of acquisition, are charged to tax on a concessional basis. In the case of taxpayers other than companies the concession is allowed by deducting a specific proportion of the long-term capital gains in computing the taxable income of the taxpayers. In the case of companies, lower rates of tax have been specified in the Income-tax Act, in respect of long-term capital gains. Finance (No. 2) Act, 1974 3. In view of large unearned incomes accruing as a result of inflationary situation, the Finance (No. 2) Act, 1974 has made the following amendments in the relevant provisions of the Income-tax Act, 1961 with a view to increasing the incidence of tax on long-term capital gains : A. Taxpayers other than Companies 1. Long-term capital gains relating to buildings or lands or any rights therein - The deduction from the total income will be Rs. 5,000 plus 25 per cent (as against 35 per cent under the existing law) of the amount by which the gains exceed Rs. 5,000. 2. Long-term capital gains relating to other capital assets - The deduction from the total income will be Rs. 5,000 plus 40 per cent (as against 50 per cent under the existing law) of the amount by which the gains exceed Rs. 5,000. Section 80T has been amended accordingly. B. Companies 1. Long-term capital gains relating to buildings or lands or any rights therein - These will be chargeable at the rate of 55 per cent as against 45 per cent under the existing law. A lower rate of 47 per cent will, however, be applied in the case of widely-held companies, having taxable income (other than long-term capital gains) not exceeding Rs. 1 lakh. 2. Long-term capital gains relating to other assets - These will be chargeable to tax at the rate of 45 per cent in the case of all companies as against 35 per cent under the existing law. Section 115 has been amended accordingly. Finance (No. 2) Act, 1974 4. These amendments will come into force from 1-4-1975, and will accordingly apply in relation to the assessment year 1975-76 and subsequent assessment years.