Amendment of section 45

In force As on 06 Oct 2026

Ministry Finance Cited by 2 provisions

Section 16 of the Finance Act, 2021 deals with amendment of section 45. Amendment of section 45. 16. In section 45 of the Income-tax Act,— (a) | after sub-section (1A), the following sub-section shall be inserted, namely:— '(1B) Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any amount under a unit l

Amendment of section 45.
16. In section 45 of the Income-tax Act,—
(a) after sub-section (1A), the following sub-section shall be inserted, namely:—
'(1B) Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any amount under a unit linked insurance policy, to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth provisos thereof, including the amount allocated by way of bonus on such policy, then, any profits or gains arising from receipt of such amount by such person shall be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of such person of the previous year in which such amount was received and the income taxable shall be calculated in such manner as may be prescribed.';
(b) for sub-section (4), the following sub-section shall be substituted, namely:—
'(4) Notwithstanding anything contained in sub-section (1), where a specified person receives during the previous year any money or capital asset or both from a specified entity in connection with the reconstitution of such specified entity, then any profits or gains arising from such receipt by the specified person shall be chargeable to income-tax as income of such specified entity under the head "Capital gains" and shall be deemed to be the income of such specified entity of the previous year in which such money or capital asset or both were received by the specified person, and notwithstanding anything to the contrary contained in this Act, such profits or gains shall be determined in accordance with the following formula, namely:—
A = B + C – D
Where,
A = income chargeable to income-tax under this sub- section as income of the specified entity under the head "Capital gains";
B = value of any money received by the specified person from the specified entity on the date of such receipt;
C = the amount of fair market value of the capital asset received by the specified person from the specified entity on the date of such receipt; and
D = the amount of balance in the capital account (represented in any manner) of the specified person in the books of account of the specified entity at the time of its reconstitution:
Provided that if the value of "A" in the above formula is negative, its value shall be deemed to be zero :
Provided further that the balance in the capital account of the specified person in the books of account of the specified entity is to be calculated without taking into account the increase in the capital account of the specified person due to revaluation of any asset or due to self-generated goodwill or any other self-generated asset.
Explanation 1.—For the purposes of this sub-section,—
(i) the expressions "reconstitution of the specified entity", "specified entity" and "specified person" shall have the meanings respectively assigned to them in section 9B;
(ii) "self-generated goodwill" and "self-generated asset" mean goodwill or asset, as the case may be, which has been acquired without incurring any cost for purchase or which has been generated during the course of the business or profession.
Explanation 2.—For the removal of doubts, it is clarified that when a capital asset is received by a specified person from a specified entity in connection with the reconstitution of such specified entity, the provisions of this sub-section shall operate in addition to the provisions of section 9B and the taxation under the said provisions thereof shall be worked out independently.'.
Section 16, The Finance Act, 2021.

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Questions about Section 16

What does Section 16 of the Finance Act deal with?

Section 16 of the Finance Act is headed "Amendment of section 45". Amendment of section 45. 16. In section 45 of the Income-tax Act,— (a) | after sub-section (1A), the following sub-section shall be inserted, namely:— '(1B) Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any amount under a unit l

How do I find court cases under Section 16 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 2021 16, section 16 Finance Act 2021, section 16 of the Finance Act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome.

What should I read with Section 16 of the Finance Act, and has it changed?

Its own text turns on section 10 (Amendment of section 43), section 45 (Amendment of section 151A), Income-tax Act 45 (Capital gains), so none of them can safely be read on its own. 2 other provisions in this corpus refer back to it.

When was the Finance Act enacted?

Finance Act was enacted in 2021. India Code records no commencement date for it. It is in force as at the date shown on this page.

Other sections of this Act

Fourth Schedule. Fourth Schedule26628 words
First Schedule. First Schedule9574 words
2. Income-tax5993 words
6. Amendment of section 103582 words
130. Substitution of new section for section 43513 words
131. Substitution of new section for section 52699 words

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(a)		after sub-section (1A), the following sub-section shall be inserted, namely:—
		'(1B) Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any amount under a unit linked insurance policy, to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth provisos thereof, including the amount allocated by way of bonus on such policy, then, any profits or gains arising from receipt of such amount by such person shall be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of such person of the previous year in which such amount was received and the income taxable shall be calculated in such manner as may be prescribed.';
(b)		for sub-section (4), the following sub-section shall be substituted, namely:—
		'(4) Notwithstanding anything contained in sub-section (1), where a specified person receives during the previous year any money or capital asset or both from a specified entity in connection with the reconstitution of such specified entity, then any profits or gains arising from such receipt by the specified person shall be chargeable to income-tax as income of such specified entity under the head "Capital gains" and shall be deemed to be the income of such specified entity of the previous year in which such money or capital asset or both were received by the specified person, and notwithstanding anything to the contrary contained in this Act, such profits or gains shall be determined in accordance with the following formula, namely:—
		A = B + C – D
		Where,
		A = income chargeable to income-tax under this sub- section as income of the specified entity under the head "Capital gains";
		B = value of any money received by the specified person from the specified entity on the date of such receipt;
		C = the amount of fair market value of the capital asset received by the specified person from the specified entity on the date of such receipt; and
		D = the amount of balance in the capital account (represented in any manner) of the specified person in the books of account of the specified entity at the time of its reconstitution:
		Provided that if the value of "A" in the above formula is negative, its value shall be deemed to be zero :
		Provided further that the balance in the capital account of the specified person in the books of account of the specified entity is to be calculated without taking into account the increase in the capital account of the specified person due to revaluation of any asset or due to self-generated goodwill or any other self-generated asset.
		Explanation 1.—For the purposes of this sub-section,—

(i)		the expressions "reconstitution of the specified entity", "specified entity" and "specified person" shall have the meanings respectively assigned to them in section 9B;
(ii)		"self-generated goodwill" and "self-generated asset" mean goodwill or asset, as the case may be, which has been acquired without incurring any cost for purchase or which has been generated during the course of the business or profession.