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Income-tax Act, 2025 [As Passed]
The materials are two versions of the preliminary definitions provision: (i) Clause 2 of the Income Tax Bill, 2025 (Old Version) and (ii) Section 2 of the Income-tax Act, 2025 [As Passed]. The focal point for comparison is clause/sub-clause (22) (definition of "capital asset") and other textual variations within Clause/Section 2. These definitions determine the scope of capital gains and other chargeability concepts and therefore affect taxpayers, tax administrators and intermediaries such as FIIs, insurers and funds. Effective dates or commencement dates are Not stated in the document.
Statutory hook: definitions provision contained in Clause/Section 2 of the respective instrument. Coverage: comprehensive list of defined terms used throughout the income-tax statute, including "capital asset" at clause/section (22). The texts include sub-definitions, cross-references to other scheduled items and to provisions of other statutes (Companies Act, SEBI Act, FEMA, etc.). The texts supply detailed inclusions and exclusions relevant for chargeability and computation of capital gains. Any legislative intent beyond the text is Not stated in the document.
Both texts define "capital asset" broadly as "property of any kind held by an assessee" and provide specified inclusions and exclusions. Key elements in both versions: (a) generic property; (b) securities held by foreign institutional investors or specified investment funds; (c) unit-linked insurance policies (subject to an exemption table); and exclusions for stock-in-trade, personal effects and certain agricultural land. The remainder of Clause/Section 2 supplies numerous other definitions that interact with capital gains provisions (e.g., "short-term capital asset", "transfer", "fair market value").
The text frames "capital asset" inclusively but carves out routine business inventory and certain types of agricultural land and personal effects. Cross-references to SEBI regulations, other sections (e.g., section 224(10)(a)), and schedules show legislative intent to align certain capital asset categories with sectoral regulation (FIIs, funds, insurance). The Act (As Passed) tends to use slightly different cross-references and more explicit modern drafting forms (e.g., clearer punctuation, additional parenthetical notes). Any express statement of legislative purpose is Not stated in the document.
Both versions list exceptions to "capital asset" including:
Specific wording and scope of some provisos differ between the Bill and the Act; detailed differences follow.
Example 1: A share held by an FII - both texts include securities held by certain foreign institutional investors within the definition, thereby making such shares capital assets for capital gains purposes.
Example 2: A painting held for personal use - both texts treat such work of art as excluded from "personal effects" exclusions (i.e., works of art are excluded from "personal effects" meaning they are treated as capital assets).
Example 3: Agricultural land beyond the prescribed distance from specified municipal limits - treated as non-capital asset (agricultural land excluded), subject to the distance/population table in the text.
The definition cross-references SEBI regulations, the Companies Act, the Securities Contracts (Regulation) Act and other statutory instruments (FEMA, Reserve Bank Act, Companies Act). The document itself does not reproduce attendant rules/notifications; therefore detailed operational interaction with those rules is Not stated in the document.
Formulation and placement of sub-clause (22)(b) - FIIs and investment funds: The Bill (old version) uses a compact formulation - "any securities held by a Foreign Institutional Investor or held by an investment fund specified in section 224(10)(a) which has invested in such securities as per the regulations..." The Act (As Passed) expands and rearranges wording: it expressly distinguishes securities held by (i) a Foreign Institution Investor which has invested in accordance with SEBI regulations, and (ii) an investment fund specified in section 224(10)(a) which has invested in accordance with SEBI regulations or under the International Financial Services Centres Authority Act, 2019.
Practical impact: the Act explicitly recognises IFSC Authority regulated funds as a route for investments to be treated as capital assets; the Bill's language is narrower/less explicit on IFSC reference. This clarifies tax treatment for funds operating under IFSC regime and reduces interpretive uncertainty for such funds. (Textual difference explicitly shown in the Act.)
Unit-linked insurance policy wording (22)(c): The Bill specifies "any unit linked insurance policy issued on or after 1st February, 2021 to which exemption under Schedule II (Table: Sl. No. 2) does not apply." The Act states "any unit linked insurance policy to which exemption under Schedule II (Table: Sl. No. 2) does not apply" (without the "issued on or after 1st February, 2021" temporal qualifier).
Practical impact: the Act's removal of the temporal qualifier broadens the category to include unit-linked policies irrespective of issuance date (subject to the Schedule II exemption). If intended, this expands the population of policies treated as capital assets and could affect capital gains computation for older policies that were outside scope in the Bill version. The documents themselves do not state legislative rationale.
Wording and granular drafting differences concerning agricultural land exclusions: Both texts retain the three-tier population/distance table but differ in presentation and minor phrasing (e.g., numeric rendering of population thresholds, "measured aerially", and references to clause numbering).
Practical impact: no substantive policy shift appears; differences are drafting/formatting. However, the Act's more detailed surrounding text (and punctuation) may reduce ambiguity in applying the distance test. The documents do not state transitional or interpretation guidance.
Definition of "personal effects": Both texts exclude "personal effects" but expressly list that jewellery, archaeological collections, drawings, paintings, sculptures and works of art are excluded from the definition of personal effects (meaning they are capital assets). The Act uses slightly different sub-paragraph labelling and inserts clarifying parentheticals (e.g., "which includes").
Practical impact: substantive treatment unchanged; drafting refinements in the Act may aid clarity in disputes concerning what constitutes "personal effects".
Cross-references, terminology modernisation and additional inclusions (Act): The Act adds or modifies some cross-references and parenthetical clarifications (for example, a more expansive definition of "securities" consistent with section references, and explicit inclusion of "property includes any rights in or in relation to an Indian company").
Practical impact: these drafting adjustments reduce potential interpretive gaps and align the definition with other restructured parts of the Act. The Bill text is somewhat older in phrasing; the Act text reflects finalised cross-references and added coverage (e.g., explicit mention of IFSC in the securities limb).
Minor drafting differences elsewhere in Clause/Section 2: There are multiple punctuation, phrase order and parenthetical differences across many definitions (e.g., "books or books of account", "domestic company", "document", "tax" etc.).
Practical impact: mostly clarificatory; no express substantive changes to core concepts are apparent from the provided texts. Any implication for interpretation beyond style and clarity is Not stated in the document.
Taxpayers and funds operating through IFSCs should note the Act's explicit inclusion of IFSC Authority regulated investment funds in the securities limb - this reduces uncertainty about whether securities held by those funds are capital assets for capital gains purposes.
The apparent removal of the issuance-date limitation for unit-linked insurance policies in the Act widens the set of policies treated as capital assets; insurers, policyholders and advisors should reassess historical policy disposals for capital gains implications.
Drafting clarifications (population/distance table, expanded parentheticals) may reduce contested interpretation on agricultural land exclusions and personal effects; practitioners should rely on the Act text for current analysis.
Given many cross-references to other Acts and SEBI/IFSC regulation, coordination between compliance teams (tax, regulatory) is necessary; the document does not supply procedural rules or notifications - those are Not stated in the document.
Both texts keep an inclusive definition of "capital asset" with targeted exclusions (stock-in-trade, personal effects, certain agricultural land).
The As Passed Act expands/clarifies the securities limb to expressly include IFSC regulated investment vehicles and broadens the treatment of unit-linked policies by removing the issuance-date limitation present in the Bill.
Most other differences are drafting, cross-reference or formatting refinements intended to reduce ambiguity; no wholesale policy reversal is evident from the texts provided.
Practical consequence: IFSC funds and certain insurance policy disposals may face changed capital gains treatment under the Act; stakeholders should review positions against the final Act text.
Where the document does not state details (e.g., effective date, legislative intent, administrative guidance), those matters are Not stated in the document.
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