Legal Insights into carry forward and set off of losses under the head "Capital gains" : Clause 111 of the Income Tax Bill, 2025 Vs. Section 74 of the Income Tax Act, 1961

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..... troduction Clause 111 of the Income Tax Bill, 2025, and Section 74 of the Income Tax Act, 1961, both address the carry forward and set off of losses under the head "Capital gains." These provisions are crucial for taxpayers, particularly those dealing with capital assets, as they dictate how losses from capital gains can be managed across different tax years. The legislative intent behind these p .....

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..... lysis of Clause 111 Clause 111 is structured to provide a clear framework for the carry forward and set off of capital losses. It is divided into several sub-sections, each addressing specific aspects of the process. 1. Sub-section (1): This provision establishes the fundamental rule that unabsorbed capital losses for any tax year shall be carried forward to the subsequent tax year. The term "u .....

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..... ding the tax year in which the loss was first computed. This limitation ensures that the provision is not used indefinitely and encourages taxpayers to manage their portfolios efficiently. Detailed Analysis of Section 74 Section 74 of the Income Tax Act, 1961, serves a similar purpose as Clause 111 but with some differences in its approach and language. 1. Sub-section (1): This provision mirro .....

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..... anguage and structure. Clause 111 is part of a new legislative framework, the Income Tax Bill, 2025, which may introduce other changes not covered in this commentary. The primary distinction lies in the terminology used, with Clause 111 referring to "tax years" and Section 74 to "assessment years." This difference could have implications for taxpayers depending on how "tax year" is defined in the .....

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..... ourages taxpayers to utilize their losses efficiently and plan their investments accordingly. This limitation also prevents the indefinite deferral of tax liabilities, ensuring that the tax system remains fair and balanced. Conclusion Clause 111 of the Income Tax Bill, 2025, and Section 74 of the Income Tax Act, 1961, both play a crucial role in the taxation of capital gains. While they share a .....

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