The Finance Bill 2025 introduces key amendments to Section 72A & 72AA of the Income Tax Act to bring clarity and prevent indefinite carry forward of losses due to successive amalgamations. Here’s what you need to know:
🔹 Existing Provisions
Sections 72A & 72AA allow the accumulated loss of an amalgamating entity to be carried forward by the successor entity for 8 years from the previous year when the amalgamation has taken place.
Currently, business losses (except speculative losses) can be carried forward for up to 8 assessment years from when they were first computed.
🔹 Key Amendments Effective from April 1, 2026
✅ Any loss forming part of accumulated loss in an amalgamation will be eligible for carry forward only for 8 years from when it was first computed by the original predecessor entity (and not from PY when amalgamation took place)
✅ The new rule applies to any amalgamation or business reorganization effected on or after April 1, 2025.
📌 Need expert tax advice on impact of the above provision on your existing business restructuring ?
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