Section 46 of Income Tax Act: for AY 2023-24

Section 46 of Income Tax Act 1961 amended by Finance Act 2022 and Rules. Capital gains on distribution of assets by companies in liquidation.

Amended and updated notes on section 46 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to capital gains on distribution of assets by companies in liquidation.

Chapter IV (Sections 14 to 59) of the Income Tax Act 1961 deals with the provisions related to computation of total income. Section 46 of IT Act 1961-2023 provides for capital gains on distribution of assets by companies in liquidation.

Recently, we have discussed in detail section 45 (Capital gains) of IT Act 1961. Today, we learn the provisions of section 46 of Income-tax Act 1961. The amended provision of section 46 is effective for financial year 2022-23 relevant to the assessment year 2023-24.

In this article, you will learn detail of the provisions of section 46 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.

Section-46: Capital gains on distribution of assets by companies in liquidation

Section 46(1) of Income Tax Act

Notwithstanding anything contained in section 45, where the assets of a company are distributed to its shareholders on its liquidation, such distribution shall not be regarded as a transfer by the company for the purposes of section 45.

Section 46(2) of Income Tax Act

Where a shareholder on the liquidation of a company receives any money or other assets from the company, he shall be chargeable to income-tax under the head “Capital gains”, in respect of the money so received or the market value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the meaning of sub-clause (c) of clause (22) of section 2 and the sum so arrived at shall be deemed to be the full value of the consideration for the purposes of section 48.

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