Thе Uniоn Вudget 2025 wаs presented by thе Finаnce Minister, Nirmаlа Sithаrаmаn, on February 1st, 2025, аt 11:00 а.m, befоre thе Pаrliаment. Thе Uniоn Вudget is thе аnnuаl finаnciаl stаtement thе Gоvernment of Indiа prеsеnts, outlining its estimаted revenue аnd expenditure fоr thе upcоming fiscаl yeаr аnd serving аs а roаdmаp fоr thе country’s еconomic prioritiеs.
The budget proposed amendments to the Income Tax Act regarding the carryforward of losses on amalgamation under Sections 72A and 72AA. The FM stated that these changes are part of the government’s continued effort to streamline tax provisions, foster corporate restructuring, and ensure an approach to tax benefits.
Certain businesses, including manufacturing, banking, power generation, and a few service sectors, are currently permitted to carry over accrued losses and unabsorbed depreciation in the case of an amalgamation under Section 72A of the Income Tax Act 1961, providing that they fulfil specific requirements.
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Under Section 72AA, these advantages are also extended to some public-sector organisations. The government has introduced a rationalised structure in response to concerns about the continuous nature of these tax benefits.
A time limit on loss carried forward is required under the proposed amendment. From the assessment year in which the loss was first calculated, any loss that constituted a component of the amalgamating entity’s total losses will now be carried forward for a maximum of eight assessment years.
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Companies availing these benefits will be subject to stricter compliance measures to prevent misuse of the provision through artificial amalgamations aimed at tax avoidance.The changes aim to preserve protections against income leakage while expanding the scope of the provision’s applicability to a more significant number of restructuring scenarios.
Some industrialised nations, such as the US and the UK, already have time-bound limitations on carrying out tax losses in M&A transactions. India hopes to align its tax system with international best practices by enacting comparable clauses, increasing its attractiveness to overseas investors while protecting its revenue base.
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