Capital gains - Distribution of assets by companies in liquidation: Clause 68 of the Income Tax Bill, 2025 vs. Section 46 of the Income-tax Act, 1961

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..... 25 Introduction Clause 68 of the Income Tax Bill, 2025, and Section 46 of the Income-tax Act, 1961, both address the taxation of capital gains arising from the distribution of assets by companies in liquidation. These provisions are significant in the context of taxation as they delineate the circumstances under which such distributions are considered transfers and how they are taxed under the h .....

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..... Detailed Analysis Clause 68 of the Income Tax Bill, 2025 Clause 68(1) states that the distribution of assets by a company on its liquidation shall not be regarded as a transfer by the company for the purposes of Section 67. This provision aligns with the principle that liquidation distributions are not typical transfers since they are a return of capital to shareholders rather than a sale or e .....

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..... er "Capital gains" for money or assets received during liquidation. The calculation method is akin to Clause 68(2), with the gain determined by the market value of the assets, reduced by amounts assessed as dividends u/s 2(22)(c), and deemed the full value of consideration for Section 48 purposes. Comparative Analysis The primary difference between Clause 68 and Section 46 lies in the specific s .....

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..... nd income to avoid potential compliance issues. Conclusion Clause 68 of the Income Tax Bill, 2025, and Section 46 of the Income-tax Act, 1961, reflect a consistent legislative approach to taxing capital gains arising from company liquidation. While the specific references for calculating gains differ, the core principles remain unchanged, ensuring continuity in tax treatment for shareholders. Fu .....

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