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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Business Restructuring

Under the Income-tax Act, 2025, when a person carrying on a business is succeeded by another who continues the business, how is income of the tax year of succession normally assessed?

The predecessor is assessed on business income of the succession year up to the date of succession, and the successor is assessed on income after that date. The year is therefore split at the date of succession, not assigned wholly to either person.

  1. APredecessor is assessed up to the date of succession; successor is assessed for the period after the date of successionCorrect
  2. BSuccessor is assessed for the whole tax year in which succession took place
  3. CPredecessor is assessed for the whole tax year and the successor from the next tax year only
  4. DPredecessor is assessed only for the preceding tax year, and the successor for the year of succession onwards

Explanation

The Act provides that the predecessor is assessed on income of the succession year up to the date of succession, and the successor is assessed on income after that date. Assessing the successor for the whole year ignores the split at the date of succession.

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