Income Tax Act 2025: Section 117 for Tax Year 2026-27

Treatment of accumulated losses and unabsorbed depreciation in scheme of amalgamation in certain cases

[Section-117 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 117(1) of Income Tax Act 2025

117(1) Irrespective of anything contained in section 2(6)(a) to (c) or section 116, where there has been an amalgamation of,—

• (a) one or more banking company with—
  • (i) any other banking institution under a scheme sanctioned and brought into force by the Central Government under section 45(7) of the Banking Regulation Act, 1949; or
  • (ii) any other banking institution or a company following a strategic disinvestment, wherein the amalgamation occurs within five years from the end of the tax year during which such disinvestment is carried out; or
• (b) one or more corresponding new bank or banks with any other corresponding new bank under a scheme brought into force by the Central Government under section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, or both; or
• (c) one or more Government company or companies with any other Government company under a scheme sanctioned and brought into force by the Central Government under section 16 of the General Insurance Business (Nationalisation) Act, 1972,

the accumulated loss and unabsorbed depreciation of such banking company or companies or amalgamating corresponding new bank or banks or amalgamating Government company or companies, shall be deemed to be the loss or, allowance for depreciation of the banking institution or company or amalgamated corresponding new bank or amalgamated Government company for the tax year in which the scheme of amalgamation was brought into force and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly.

Section 117(2) of Income Tax Act 2025

117(2) Where any scheme of such amalgamation is brought into force on or after the 1st April, 2025, any loss forming part of the accumulated loss of the predecessor entity, being—

• (i) the banking company or companies;
• (ii) the amalgamating corresponding new bank or banks; or
• (iii) the amalgamating Government company or companies,

as the case may be, which is deemed to be the loss of the successor entity, being—

• (a) the banking institution or company; or
• (b) the amalgamated corresponding new bank or banks; or
• (c) the amalgamated Government company or companies,

as the case may be, shall be carried forward in the hands of the successor entity for not more than eight tax years immediately succeeding the tax year for which such loss was first computed for original predecessor entity.

Section 117(3) of Income Tax Act 2025

117(3) In this section,—

• (a) “accumulated loss” means so much of the loss of the amalgamating banking company or companies or amalgamating corresponding new bank or banks or amalgamating Government company or companies under the head “Profits and gains of business or profession” (excluding losses of a speculation business) which such amalgamating company or companies would have been entitled to carry forward and set off under section 112 had the amalgamation not occurred;
• (b) “banking company” shall have the same meaning as assigned to it in section 5(c) of the Banking Regulation Act, 1949;
• (c) “banking institution” shall have the same meaning as assigned to it in section 45(15) of the Banking Regulation Act, 1949;
• (d) “corresponding new bank” shall have the same meaning as assigned to it in section 2(d) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, or section 2(b) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980;
• (e) “general insurance business” shall have the same meaning as assigned to it in section 3(g) of the General Insurance Business (Nationalisation) Act, 1972;
• (f) “Government company” means a Government company as defined in section 2(45) of the Companies Act, 2013, engaged in the general insurance business and established under section 4 or 5 or 16 of the General Insurance Business (Nationalisation) Act, 1972;
• (g) “original predecessor entity” means predecessor entity in respect of the first amalgamation;
• (h) “strategic disinvestment” shall have the meaning assigned to it in section 116(3)(c);
• (i) “unabsorbed depreciation” means the allowance for depreciation of the amalgamating banking company or companies or amalgamating corresponding new bank or banks or amalgamating Government company or companies which remains to be allowed and which would have been allowed to such entity, had the amalgamation not occurred.

FAQs on Section 117 of Income Tax Act 2025

What is the purpose of Section 117 of the Income Tax Act, 2025?
Section 117 provides for the treatment of accumulated losses and unabsorbed depreciation in cases of amalgamation involving certain banking and insurance entities.

Which types of amalgamations are covered under Section 117(1)?
Section 117(1) covers amalgamations of banking companies, corresponding new banks, and Government insurance companies under schemes sanctioned by the Central Government.

Does Section 117 override other provisions of the Act?
Yes, Section 117 applies notwithstanding anything contained in section 2(6)(a) to (c) or section 116 of the Act.

What happens to the accumulated losses and unabsorbed depreciation of the amalgamating entity?
They are deemed to be the losses or depreciation of the amalgamated (successor) entity for the tax year in which the scheme of amalgamation takes effect.

Are there any conditions related to strategic disinvestment in banking company amalgamations?
Yes, where amalgamation follows a strategic disinvestment, it must occur within five years from the end of the tax year during which such disinvestment took place.

What is the treatment of accumulated losses in amalgamations of corresponding new banks?
Such losses are treated as losses of the amalgamated corresponding new bank, subject to the same conditions and benefits as mentioned under this section.

How are Government insurance companies treated under this section?
Amalgamations under schemes sanctioned under section 16 of the General Insurance Business (Nationalisation) Act, 1972 are included, with similar treatment for losses and depreciation.

How long can the accumulated losses be carried forward by the amalgamated entity?
As per Section 117(2), such losses can be carried forward for not more than eight tax years immediately succeeding the year for which they were first computed for the original predecessor entity.

Is there any limitation on the carry forward period for unabsorbed depreciation?
Section 117(2) refers only to losses. Unabsorbed depreciation is covered by the general provisions of the Act relating to depreciation.

What is meant by ‘accumulated loss’ in this section?
It refers to business losses (excluding speculative business losses) that the amalgamating entity could have carried forward under section 112 had the amalgamation not occurred.

What is ‘unabsorbed depreciation’ under this section?
It refers to depreciation that remains to be allowed to the amalgamating entity and would have been allowed had the amalgamation not taken place.

What is an ‘original predecessor entity’?
It means the predecessor entity in respect of the first amalgamation.

Is speculative business loss considered under accumulated losses in Section 117?
No, speculative business losses are expressly excluded from the definition of accumulated loss under Section 117(3)(a).

Who sanctions the amalgamation schemes mentioned in Section 117?
The schemes must be sanctioned and brought into force by the Central Government under the respective governing statutes.

Does this section apply to all companies or only specific categories?
It applies specifically to banking companies, corresponding new banks, and Government insurance companies as defined in the relevant Acts.

What is the meaning of ‘strategic disinvestment’ in this context?
It has the meaning assigned to it under section 116(3)(c) of the Income Tax Act, 2025.

From when is Section 117 applicable?
It is applicable with effect from 1st April, 2026.

Does the successor entity get full rights to use the losses and depreciation?
Yes, but subject to conditions specified, including the time limit for loss carry forward under Section 117(2).

Are losses automatically transferred to the successor entity?
Yes, if the amalgamation is covered under this section, the transfer of losses and depreciation happens by deeming fiction.

What are the relevant statutes for the schemes of amalgamation under Section 117?
These include the Banking Regulation Act, 1949; Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980; and the General Insurance Business (Nationalisation) Act, 1972.