Skip to content

CS Professional · Advanced Direct Tax Laws and Practice · Income Tax Implication on Specified Transactions

Under section 116 of the Income-tax Act, 2025, an amalgamation effected on or after 1 April 2025 passes a business loss to the amalgamated company. The loss was first computed for the original predecessor entity in tax year 2024-25. For how long can this loss be carried forward in the amalgamated company's hands?

The loss can be carried forward for not more than eight tax years immediately succeeding the year in which it was first computed for the original predecessor entity, here 2024-25. The period is counted from the original loss year and does not restart on amalgamation.

  1. AUp to eight tax years immediately succeeding 2024-25Correct
  2. BUp to eight tax years from the year of amalgamation
  3. CIndefinitely, as business loss has no time limit
  4. DUp to four tax years from the year of amalgamation

Explanation

Section 116(12) provides that such a loss is carried forward for not more than eight tax years immediately succeeding the tax year for which it was first computed for the original predecessor entity. The count therefore starts from the original loss year, 2024-25, not from the amalgamation year. The clock is not restarted by the amalgamation.

Did you get it right without looking?

One question tells you little. A timed set on Income Tax Implication on Specified Transactions shows your real accuracy, how long you take and where you lose marks.

Practise Income Tax Implication on Specified TransactionsFree diagnostic mock

More Income Tax Implication on Specified Transactions questions