Additional criteria that the resulting company needs to meet in a demerger for the purpose of set-off and carry forward of losses and depreciation allowances - (New) Section 116(6) & (7) / (Old) Section 72A(4)&(5)
Set off and Carry forward of Losses
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Demerger loss allocation permits resulting companies to use directly related losses, while shared amounts follow transferred asset proportions. In a demerger, accumulated losses and unabsorbed depreciation directly attributable to a transferred undertaking may be carried forward and set off by the ... Summary
Demerger loss allocation permits resulting companies to use directly related losses, while shared amounts follow transferred asset proportions.
In a demerger, accumulated losses and unabsorbed depreciation directly attributable to a transferred undertaking may be carried forward and set off by the resulting company. Amounts not directly attributable must be apportioned between the demerged company and resulting company in the proportion of assets retained and transferred, with each entity entitled to carry forward and set off its allocated amount. The Central Government may notify conditions to ensure genuine business-purpose demergers. The framework under section 116 of the Income Tax Act, 2025 corresponds to the earlier regime under section 72A of the Income Tax Act, 1961.
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