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Section2
The Finance Act, 1972

Income-tax

In force Act 16 of 1972 As on 15 Oct 2026

Act 16 of 1972 Ministry Finance Enacted 28 May 1972 Cited by 14 provisions

Section 2 of the Finance Act, 1972 deals with income-tax. CHAPTER II RATES OF INCOME-TAX Income-tax. The Act was enacted on 28 May 1972.

CHAPTER II

RATES OF INCOME-TAX

Income-tax.

2. (1) Subject to the provisions of sub-sections (2) and (3), for the assessment year commencing on the 1st day of April, 1972, income-tax shall be charged at the rates specified in Part I of the First Schedule and shall be increased,—

(a) in the cases to which Paragraphs A, B and D of that Part apply, by a surcharge for purposes of the Union;

(b) in the cases to which Paragraph C of that Part applies, by a surcharge for purposes of the Union and a special surcharge for purposes of the Union; and

(c) in the cases to which Paragraph E and F of that Part apply by a surcharge,

calculated in each case in the manner provided therein.

(2) In making any assessment for the assessment year commencing on the 1st day of April, 1972, where the total income of a company, other than the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), includes any profits and gains from life insurance business, the income-tax payable by it shall be the aggregate of the income-tax calculated—

(i) on the amount of profits and gains from life insurance business so included, at the rate applicable in the case of the Life Insurance Corporation of India, in accordance with Paragraph E of Part I of the First Schedule, to that part of its total income which consists of profits and gains from life insurance business; and

(ii) on the remaining part of its total income, at the rate applicable to the company on its total income.

(3) In cases to which Chapter XII or section 164 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act) applies, the tax chargeable shall be determined as provided in that Chapter or that section, and with reference to the rates imposed by sub-section (1) or the rates as specified in that Chapter or section, as the case may be.

(4) In cases in which tax has to be deducted under sections 193, 194, 194A, 194B and 195 of the Income-tax Act at the rates in force, the deduction shall be made at the rates specified in Part II of the First Schedule.

(5) In cases in which income-tax has to be calculated under the first proviso to sub-section (5) of section 132 of the Income-tax Act or charged under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 of the said Act or deducted under section 192 of the said Act from income chargeable under the head "Salaries" or deducted under sub-section (9) of section 80E of the said Act from any payment referred to in the said sub-section (9) or in which the "advance tax" payable under Chapter XVII-C of the said Act has to be computed, at the rate or rates in force, such income-tax or, as the case may be, "advance tax" shall be so calculated, charged, de ducted or computed at the rate or rates specified in Part III of the First Schedule:

Provided that in respect of any income chargeable to tax under section 164 of the Income-tax Act at the rate of sixty-five per cent, "advance tax" shall be computed at that rate.

(6) For the purposes of this section and the First Schedule,—

(a) "company in which the public are substantially interested" means a company which is such a company as is referred to in section 108 of the Income-tax Act;

(b) "domestic company" means an Indian company, or any other company which, in respect of its income liable to income-tax under the Income-tax Act for the assessment year commencing on the 1st day of April, 1972, has made the prescribed arrangements for the declaration and payment within India of the dividends (Including dividends on preference shares) payable out of such income in accordance with the provisions of section 194 of that Act:

(c) "industrial company" means a company which is mainly enfaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining.

Explanation.—For the purposes of this clause, a company shall be deemed to be mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining, if the income attributable to any one or more of the aforesaid activities included in its total income of the previous year (as computed before making any deduction under Chapter VIA of the Income-tax Act) is not less than fifty-one per cent of such total income;

(d) "tax-free security" means any security of the Central Government issued or declared to be income-tax free, or any security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government;

(e) all other words and expressions used in this section and the First Schedule but not defined in this sub-section and defined in the Income-tax Act shall have the meanings, respectively, assigned to them in that Act.

[Finance Act, 1972]

© Copyright. Taxmann Publications Pvt. Ltd.

Section 2, The Finance Act, 1972 (Act 16 of 1972).

Cross-references

Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.

This section refers to

  1. Income-tax Act s. 132 Search and seizure
  2. Income-tax Act s. 164 Charge of tax where share of beneficiaries unknown
  3. Income-tax Act s. 193 Interest on securities
  4. Income-tax Act s. 194 Dividends
  5. Income-tax Act s. 194A Interest other than "Interest on securities"
  6. Income-tax Act s. 194B Winnings from lottery or crossword puzzle, etc
  7. Income-tax Act s. 195 Other sums

Referred to by 14

  1. s. 1 Short title and commencement
  2. s. 3 Amendment of section 2
  3. s. 9 Insertion of new section 54C
  4. s. 10 Amendment of section 56
  5. s. 26 Amendment of section 139
  6. s. 27 Amendment of section 164
  7. s. 33 Amendment of section 207
  8. s. 34 Amendment of section 208
  9. s. 35 Amendment of section 209
  10. s. 36 Amendment of section 211
  11. s. 37 Amendment of section 2l2
  12. s. 42 Amendment of Fourth Schedule

and 2 more

Related judgements & precedents

These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.

  1. Commr. of Income Tax-iii, Gujarat vs Patel Gruh Nirman Flat Yojana 5

    Supreme Court of India 20 Nov 2015 Binding (SC)

    Court's Decision & Legal Precedent

    A promotional scheme offering prizes by lucky draw to incentivize timely payment of installments in a real estate transaction does not constitute a lottery business requiring tax deduction at source under Section 194B of the Income Tax Act, 1961, because: (1) there is no independent consideration paid for participation in the lucky draw; (2) participation is automatic upon becoming a plot purchaser; (3) the scheme lacks the essential elements of a lottery (separate ticket purchase, risk of loss, independent consideration); and (4) the scheme is a business promotion activity, not a lottery business. Therefore, tax deduction at source is not applicable to prizes awarded under such promotional schemes.

    On this section: Inserted with effect from 01.04.1972 to include winnings from lotteries and games as taxable income.

    Read the full order on eCourts India

The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.

Questions about Section 2

What have the courts held on Section 2 of the Finance Act?

Commr. of Income Tax-iii, Gujarat vs Patel Gruh Nirman Flat Yojana 5 (20 Nov 2015) is the leading judgment on this section among those set out below: Inserted with effect from 01.04.1972 to include winnings from lotteries and games as taxable income.

How do I find court cases under Section 2 of the Finance Act?

In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Finance Act 1972 2, section 2 Finance Act 1972, section 2 of the Finance Act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is set out on this page, beginning with Commr. of Income Tax-iii, Gujarat vs Patel Gruh Nirman Flat Yojana 5 (20 Nov 2015).

What should I read with Section 2 of the Finance Act, and has it changed?

Its own text turns on Income-tax Act 132 (Search and seizure), Income-tax Act 164 (Charge of tax where share of beneficiaries unknown), Income-tax Act 193 (Interest on securities), Income-tax Act 194 (Dividends), and on 3 further provisions, so none of them can safely be read on its own. 14 other provisions in this corpus refer back to it.

When was Section 2 of the Finance Act enacted?

Section 2 of the Finance Act, cited as Finance Act 1972 2, was enacted on 28 May 1972 as Act 16 of 1972. It is in force as at the date shown on this page.

Other sections of this Act

Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Harvested from the Income Tax Department's own portal at incometaxindia.gov.in, which publishes the Finance Acts section by section. India Code carries none of them: its Central community holds the Acts that stand as general law, and a Finance Act is an amending and rate-fixing instrument. This page is not a substitute for legal advice.