Section 52 Income Tax Act 2025: How Are Telecom Fees and VRS Costs Deducted?

Section 52 of the Income-tax Act, 2025 permits specified expenditure to be deducted over multiple tax years rather than entirely in one year. It covers amalgamation and demerger expenses, voluntary retirement payments, and capital payments for telecommunications spectrum and operating licences.

Applicable law: Income-tax Act, 2025 (Act 30 of 2025), effective from 1 April 2026. This guide describes Section 52 as amended and should be read with the applicable rules and the terms of the relevant licence or scheme.

What expenditure qualifies under Section 52?

Sub-section (1) sets out four categories. Each has its own starting tax year and amortisation period:

Expenditure	First tax year	Period
Indian company expenditure wholly and exclusively for amalgamation or demerger of an undertaking	Year of amalgamation or demerger	5 tax years
Amount paid to an employee under a voluntary retirement scheme	Year of payment	5 tax years
Capital expenditure actually paid to acquire the right to use telecom spectrum	Later of commencement of telecom business or payment	Remaining spectrum validity through expiry year
Capital expenditure actually paid to acquire the right to operate telecom services (licence fee)	Later of commencement of telecom business or payment	Remaining licence validity through expiry year

What happens if spectrum or a licence is transferred?

Section 52(2) and (3) prescribe special adjustments where a spectrum right or telecom licence is transferred wholly or partly. Depending on capital proceeds and the unallowed balance, a further deduction may arise, a business-income charge may apply, or future instalments may cease. For a qualifying transfer in an amalgamation or demerger to an Indian successor company, the successor generally continues the amortisation treatment.

Where part of a licence or spectrum is transferred and the specific recapture rules do not apply, the unallowed expenditure is adjusted for capital proceeds and the remaining amount is allocated across the relevant unexpired tax years. The detailed statutory computation must be applied to the actual transaction.

Can depreciation or another deduction also be claimed?

No double deduction is permitted. Section 52(4) prevents depreciation under Section 33(1) to (10) on spectrum or licence expenditure already deducted under Section 52. It also prevents a second deduction under another provision for the amalgamation, demerger or voluntary retirement expenditure covered by the section.

What if a condition is breached?

Under Section 52(5), where a spectrum deduction was granted and the taxpayer later fails to comply with the applicable provisions, the deduction may be treated as wrongly allowed and the assessment rectified under Section 287, subject to the special time computation provided in Section 52.

What happens on business reorganisation?

Section 52(6) provides continuity for unexpired voluntary retirement expenditure deductions on specified business reorganisations. The successor continues the remaining deductions; the predecessor cannot claim the deduction for the year in which that reorganisation occurs.

Important definitions in Section 52(7)

Actually paid: Actual payment of expenditure, irrespective of when the liability arose under the taxpayer's regular accounting method, or payment in a prescribed manner.

Equal instalments: The deductible proportion is one divided by the number of tax years specified for the relevant category in the statutory table.

Specified business reorganisation: Includes qualifying Indian-company amalgamations, demergers, succession of a firm or proprietorship by a company satisfying Section 70(1)(zd), and qualifying conversion of a private or unlisted public company into an LLP under Section 70(1)(ze).

Practical examples of Section 52 deductions

Example 1: Amalgamation expenditure

An Indian company incurs Rs. 10,00,000 wholly and exclusively for a qualifying amalgamation in tax year 2026-27. Subject to the statutory conditions, the deduction is Rs. 2,00,000 in each of five tax years beginning 2026-27.

Example 2: Voluntary retirement scheme

A business pays Rs. 25,00,000 to employees under a qualifying voluntary retirement scheme in tax year 2026-27. The expenditure is spread equally: Rs. 5,00,000 per tax year over five tax years, subject to the section's provisions.

Example 3: Telecom spectrum

A telecom operator actually pays Rs. 90,00,000 for spectrum and the applicable deduction begins in 2026-27. If the right remains in force through 2034-35, the nine tax years from 2026-27 to 2034-35 give a deduction of Rs. 10,00,000 per year, assuming no transfer or other adjustment.

Important: Illustrations are simplified. Verify the licence or spectrum expiry year, payment date, business commencement, transfers and any transitional provisions before computing a return.

Frequently asked questions

Is amalgamation expenditure deductible in one year?

No. Qualifying expenditure of an Indian company is ordinarily deducted in five equal annual instalments beginning with the tax year of amalgamation or demerger.

Does Section 52 cover telecom spectrum and licence fees?

Yes. Qualifying capital expenditure actually paid for these rights is amortised over the applicable remaining period of the spectrum or licence, starting no earlier than the later of business commencement or payment.

Can voluntary retirement payments be amortised?

Yes. Eligible payments to employees under a voluntary retirement scheme are deducted in five equal instalments starting in the tax year of payment.

Can the same expenditure be deducted twice?

No. Section 52 includes restrictions on overlapping depreciation and other deductions.

Official law and further reading

Consult the official consolidated Act and the Income Tax Department's legislative resources for the authoritative text and subsequent amendments.

Official Income-tax Act 2025 PDF Income Tax Department Act resources

Last reviewed: 10 November 2026. Educational summary; the enacted provision and applicable rules prevail.