Quick Summary
Tax experts and industry voices have raised serious concerns over the Income Tax Bill, 2025, saying the proposed law excludes fast-track demergers from tax-neutral treatment, contradicting the government's aim of promoting ease of doing business and encouraging corporate restructuring. While the draft Bill includes fast-track mergers under Section 233 of the Companies Act, 2013, within the scope of "amalgamation," it excludes fast-track demergers, thereby creating a disparity in tax treatment t
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FAQ :
The primary concern is that the Bill excludes fast-track demergers from tax-neutral treatment, unlike fast-track mergers, creating a disparity in tax benefits.
Startups, MSMEs (Micro, Small, and Medium Enterprises), and closely held companies are expected to be most affected by the exclusion of fast-track demergers from tax neutrality.
The Bill grants tax neutrality to demergers approved under Sections 230-232 of the Companies Act (requiring NCLT approval), but excludes those under Section 233 (non-court monitored, handled by regional directors).
The Ministry of Finance cited concerns about a lack of judicial oversight and potential valuation manipulations in fast-track demerger transactions.
Experts suggest that regulatory checks, rather than a complete denial of capital gains exemption, could address concerns about oversight and valuation.
Experts hope the government will revise the Bill to allow tax-neutral treatment for fast-track demergers, aligning tax law with company law and reducing burdens on businesses.
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