Section 74 of Income Tax Act for AY 2023-24

Notes on section 74 of Income Tax Act 1961 as amended by Finance Act 2022 and Income-tax Rules, 1962. Losses under the head Capital gains.

Amended and updated notes on section 74 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 losses under the head “Capital gains”.

Chapter VI (Sections 66 to 80) of the Income Tax Act 1961 deals with the provisions related to aggregation of income and set off or carry forward of loss. Section 74 of IT Act 1961-2023 provides for losses under the head “Capital gains”.

Recently, we have discussed in detail section 73A (carry forward and set off of losses by specified business) of IT Act 1961. Today, we learn the provisions of section 74 of Income-tax Act 1961. The amended provision of section 74 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 74 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-74: Losses under the head “Capital gains”

Section 74(1) of Income Tax Act

Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and—

  • (a) in so far as such loss relates to a short-term capital asset, it shall be set off against income, if any, under the head “Capital gains” assessable for that assessment year in respect of any other capital asset;
  • (b) in so far as such loss relates to a long-term capital asset, it shall be set off against income, if any, under the head “Capital gains” assessable for that assessment year in respect of any other capital asset not being a short-term capital asset;
  • (c) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on.

Section 74(2) of Income Tax Act

No loss shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.

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