Amortisation of expenditure for telecommunications services, amalgamation, demerger, scheme of voluntary retirement, etc.
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 52(1) of Income Tax Act 2025
52(1) Where an expenditure of the nature specified in column B of the Table given below is incurred during the tax year, a deduction or part thereof shall be allowed in equal instalments in each of the tax years as mentioned in column D of the said Table, beginning from the initial tax year specified in column C thereof.
Table
| Sl. No. | Nature of expenditure | Initial tax year | Number of tax years over which deduction of expenditure is allowable in equal instalments |
|---|---|---|---|
| A | B | C | D |
| 1 | Expenditure incurred by an Indian company, wholly and exclusively for the purposes of amalgamation or demerger of an undertaking. | Tax year in which such amalgamation or demerger takes place. | Five tax years. |
| 2 | Amount paid to an employee in connection with his voluntary retirement as per any scheme of voluntary retirement. | Tax year in which such payment is made. | Five tax years. |
| 3 | Capital expenditure incurred and actually paid for acquiring any right to use spectrum for telecommunication services (spectrum fee). | Tax year in which,— (a) the business to operate telecom services is commenced; or (b) spectrum fee is actually paid, whichever is later. | Number of years commencing from the initial tax year and ending in the tax year up to which the spectrum for which the fee is paid remains in force. |
| 4 | Capital expenditure incurred and actually paid for acquiring any right to operate telecommunication services (herein referred to as licence fee). | Tax year in which,— (a) the business to operate telecom services is commenced; or (b) licence fee is actually paid, whichever is later. | Number of years commencing from the initial tax year and ending in the tax year up to which the licence for which the fee is paid remains in force. |
Section 52(2) of Income Tax Act 2025
52(2) Where the rights referred to in sub-section (1) (Table: Sl. No. 3 or 4) are transferred and—
- (a) where the proceeds of the transfer (so far as they consist of capital sums) are less than the expenditure though incurred, but remaining unallowed, a deduction equal to such expenditure remaining unallowed, as reduced by the proceeds of the transfer, shall be allowed in respect of the tax year in which the licence is transferred;
- (b) where the whole or part of the right is transferred, the proceeds of the transfer (so far as they consist of capital sums) exceed the amount of the expenditure though incurred, but remaining unallowed, so much of the excess as does not exceed the difference between the expenditure incurred to obtain the licence and the amount of such expenditure remaining unallowed, shall be
- chargeable to income-tax as profits and gains of the business in the tax year in which the licence has been transferred;
- (c) where the rights under clause (b) is transferred in a tax year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that tax year;
- (d) where the whole or part of the right is transferred, the proceeds of the transfer (so far as they consist of capital sums) are equal or greater than the amount of expenditure incurred remaining unallowed, no deduction for such expenditure shall be allowed under sub-section (1) in respect of the tax year in which the licence is transferred or in respect of any subsequent tax year or years;
- (e) such transfer is in a scheme of amalgamation or demerger to the amalgamated company or resulting company, being an Indian company,—
- (i) the provisions of clauses (a), (b), (c) and (d) shall not apply to the amalgamating or demerged company; and
- (ii) all the provisions of this section shall continue to apply to the amalgamated or resulting company as it would have applied to the amalgamating or demerged company, as if the transfer has not taken place.
Section 52(3) of Income Tax Act 2025
52(3) Where a part of the rights is transferred in a tax year and sub-section (2)(b) and (c) does not apply, the deduction to be allowed under sub-section (1) for the expenditure incurred remaining unallowed shall be arrived at by—
- (a) subtracting the proceeds of transfer (so far as they consist of capital sums) from the expenditure remaining unallowed; and
- (b) dividing the remainder by the number of relevant tax years which have not expired at the beginning of the tax year during which the licence is transferred.
Section 52(4) of Income Tax Act 2025
52(4) No deduction shall be allowed––
- (a) for depreciation under section 33(1) to (10) in respect of expenditure mentioned in sub-section (1) (Table: Sl. No. 3 or 4), where deduction under this section is claimed and allowed for any tax year;
- (b) under any other provision of this Act in respect of the expenditure mentioned in sub-section (1) (Table: Sl. No. 1 or 2).
Section 52(5) of Income Tax Act 2025
52(5) In case any deduction has been claimed and granted in respect of an expenditure referred in sub-section (1) (Table: Sl. No. 3) and there is subsequent failure on part of the assessee to comply with any of the provisions of this section, then,—
- (a) the deduction shall be deemed to have been wrongly allowed;
- (b) the Assessing Officer may, irrespective of any other provisions of this Act, recompute the total income of the assessee for the said tax year by making necessary rectification;
- (c) the provisions of section 287 shall, so far as may be, apply; and
- (d) the period of four years specified in section 287(8) shall be counted from the end of the tax year in which such failure takes place.
Section 52(6) of Income Tax Act 2025
52(6) Where a specified business reorganisation takes place before the expiry of the period specified in sub-section (1) (Table: Sl. No. 2.D), in case of an expenditure referred against serial number 2 thereof, then,—
- (a) the provisions of this section shall continue to apply to the successor entity for the tax year in which the business reorganisation took place and subsequent tax years; and
- (b) no deduction shall be allowed to the predecessor entity under this section for the tax year in which such reorganisation takes place.
Section 52(7) of Income Tax Act 2025
52(7) In this section,––
- (a) “actually paid” means the actual payment of expenditure irrespective of the tax year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee or payable in such manner, as prescribed;
- (b) “equal installments” shall be calculated by taking numerator as 1 and denominator as the tax years mentioned in column D of the Table in sub-section (1);
- (c) “specified business reorgnisation” means––
- (i) amalgamation of an Indian company and its undertaking with another Indian company; or
- (ii) demerger of an undertaking of an Indian company to another company; or
- (iii) succession of a firm or proprietorship concern to a company fulfilling conditions as laid down in section 70(1)(zd); or
- (iv) conversion of a private company or unlisted public company to a limited liability partnership fulfilling conditions laid down in section 70(1)(ze).
FAQs on Section 52 of Income Tax Act 2025
Q1. What is the objective of Section 52 of the Income Tax Act, 2025?
A: Section 52 provides for the amortisation of certain specified expenditures over multiple years, rather than allowing full deduction in a single year, thereby ensuring a fairer reflection of expenses and income over time.
Q2. From which date is Section 52 applicable?
A: Section 52 is applicable with effect from 1st April, 2026, i.e., from Assessment Year 2026–27 onwards.
Q3. What types of expenditures are covered under Section 52(1)?
A: The following expenditures are covered:
- Expenses for amalgamation/demerger (Indian company).
- Voluntary retirement payments.
- Spectrum fee for telecom services.
- Licence fee for telecom services.
Q4. What type of expenditure is eligible for amortisation in case of amalgamation or demerger?
A: Any expenditure incurred wholly and exclusively by an Indian company for the purposes of amalgamation or demerger of an undertaking.
Q5. Over how many years is the deduction allowed for such expenditure?
A: The deduction is allowed in equal instalments over five tax years, starting from the tax year in which the amalgamation or demerger takes place.
Q6. Can the company claim deduction under any other section for the same expenditure?
A: No. As per Section 52(4)(b), no deduction is allowed under any other provision for this expenditure.
Q7. What kind of expenditure under VRS is eligible for amortisation?
A: Any amount paid to an employee under a scheme of voluntary retirement is eligible.
Q8. When does the amortisation begin?
A: From the tax year in which such payment is made.
Q9. For how long is the deduction allowed?
A: In equal instalments over five tax years.
Q10. What happens if there is a business reorganisation during the amortisation period?
A: Under Section 52(6), the successor entity will continue to claim the remaining deduction, while the predecessor cannot claim any deduction in the year of reorganisation.
Q11. What qualifies as spectrum or licence fee under Section 52?
A: Capital expenditure incurred and actually paid for acquiring the right to use:
- Spectrum for telecom services (spectrum fee).
- Operate telecom services (licence fee).
Q12. When does the deduction period begin for spectrum or licence fee?
A: The initial tax year is the later of:
- The year business to operate telecom services is commenced, or
- The year in which spectrum/licence fee is actually paid.
Q13. Over how many years is deduction allowed for spectrum/licence fee?
A: Over the number of years the spectrum/licence remains in force.
Q14. Can depreciation be claimed on the same expenditure?
A: No. Section 52(4)(a) prohibits claiming depreciation under Section 33 for spectrum/licence fee if amortisation is claimed under Section 52.
Q15. What happens if the spectrum or licence rights are transferred?
A: The tax treatment depends on whether the proceeds are less than, equal to, or more than the unallowed expenditure. Refer to clauses (a) to (d) of Section 52(2).
Q16. Will the business need to exist at the time of transfer?
A: No. As per Section 52(2)(c), the provisions apply even if the business has ceased to exist.
Q17. What happens in case of transfer under amalgamation or demerger?
A: Section 52(2)(e) provides that the deduction continues with the amalgamated or resulting company, as if no transfer occurred.
Q18. What if only part of the spectrum/licence is transferred?
A: If Section 52(2)(b) and (c) do not apply, the deduction for remaining years is recalculated by reducing the unallowed amount by transfer proceeds and dividing by remaining tax years.
Q19. What happens if the provisions of Section 52 are not complied with after claiming deduction?
A: The deduction shall be deemed wrongly allowed and the Assessing Officer can recompute income, even overriding other provisions. Section 287 applies for rectification.
Q20. What is the time limit for such rectification?
A: Four years from the end of the tax year in which the failure occurred, as per Section 52(5)(d) read with Section 287(8).
Q21. What does “actually paid” mean in this context?
A: It refers to the actual payment, regardless of the accounting method or the year in which liability was incurred.
Q22. What does “equal instalments” mean?
A: It means dividing the total eligible expenditure by the number of years specified in Column D of the Table in Section 52(1).
Q23. What is “specified business reorganisation” under this section?
A: It includes:
- Amalgamation,
- Demerger,
- Succession of firm/proprietorship by company (per Section 70(1)(zd)),
- Conversion of private/unlisted public company to LLP (per Section 70(1)(ze)).
Section 52 of the Income Tax Act, 2025, effective from 1st April, 2026, is a comprehensive provision enabling taxpayers to claim gradual deductions on high-value expenditures relating to:
- Corporate restructuring (amalgamation or demerger),
- Employee separation (voluntary retirement schemes), and
- Telecommunication operations (spectrum and licence fees).
The section ensures a systematic and fair allocation of such capital or restructuring costs over specified periods, aligning tax deductions with the economic benefits derived. It also provides clear rules for treatment upon transfer of rights, business reorganisation, and non-compliance, reinforcing both compliance discipline and continuity of benefits where business structures change.
Taxpayers should carefully assess eligibility, timelines, and compliance obligations under this section to maximize benefits and avoid disallowance or retrospective tax adjustments.
