Structured mechanism for treatment of losses from specified businesses in Clause 114 of the Income Tax Bill, 2025 Vs. Comparison with Section 73A of the Income-tax Act, 1961

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....o future tax years. Understanding the nuances of these provisions is essential for legal practitioners and taxpayers alike, as they impact tax planning and compliance. Clause 114 is a proposed update in the Income Tax Bill, 2025, aiming to refine the rules regarding the set-off and carry forward of losses from specified businesses. Section 73A, on the other hand, has been part of the Indian tax landscape since its insertion by the Finance (No. 2) Act, 2009, effective from April 1, 2010. This commentary explores the objectives, implications, and practical applications of these provisions, highlighting the differences and similarities between them. Objective and Purpose The primary objective of both Clause 114 and Section 73A is to provide ....

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....n be carried forward to subsequent tax years. These losses can only be set off against profits from specified businesses in future years. This ensures continuity in the treatment of losses and allows businesses to utilize losses over time. 3. Definitions:- Clause 114(3) defines key terms such as "specified business" and "unabsorbed loss from the specified business." The definition of "specified business" refers to activities listed in Section 46, while "unabsorbed loss" refers to losses not fully set off in the current tax year. Section 73A of the Income-tax Act, 1961 1. Set-off of Losses:- Similar to Clause 114, Section 73A(1) states that losses from specified businesses can only be set off against profits from other specified busines....

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....ction 73A share similar objectives and structures, there are notable differences: 1. Scope of Specified Business:- Clause 114 refers to "specified business" as defined in Section 46 of the Income Tax Bill, 2025, whereas Section 73A refers to businesses u/s 35AD of the Income-tax Act, 1961. This difference in scope may lead to variations in the businesses covered under each provision. 2. Legislative Context:- Clause 114 is part of a broader effort to update and streamline the Income Tax Act, reflecting changes in the economic and business landscape. Section 73A, however, was introduced as part of specific tax incentives for capital-intensive sectors. 3. Potential for Future Amendments:- As a proposed bill, Clause 114 may undergo change....