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Section 64 Income Tax Act 2025: How Are Deductions Calculated After Co-operative Bank Reorganisation?

Section 64 prescribes how specified deductions are divided when a co-operative bank undergoes business reorganisation during a tax year. The rule prevents duplication of deductions while preserving eligible deductions for a successor institution.

Legal position: The Income-tax Act, 2025 came into force on 1 April 2026. Section 64 should be read with Section 65 (interpretation) and the relevant deduction provisions. This guide explains the statutory framework; actual eligibility depends on the facts and applicable conditions.

What does Section 64 cover?

Section 64 applies where a business reorganisation of a co-operative bank takes place during the tax year. It regulates deductions otherwise allowable under Section 33 (depreciation), Section 44 (amortisation of specified preliminary expenditure) and Section 52(1), Table, serial numbers 1 and 2 (specified amortisation deductions). The precise scope of each deduction remains governed by its own section.

How are deductions apportioned between the banks?

Under Section 64(2), the deduction that would have been allowable to the predecessor bank without reorganisation is apportioned according to the number of days in the tax year attributable to each institution.

Predecessor co-operative bank: Deduction = A × B / C.

Successor co-operative bank or converted banking company: Deduction = A × D / C.

  • A: Deduction allowable to the predecessor bank if no business reorganisation had occurred.
  • B: Days from the first day of the tax year through the day immediately before reorganisation.
  • C: Total days in the tax year of reorganisation.
  • D: Days from the reorganisation date through the last day of that tax year.

Because B + D = C, the two allocated amounts together equal A, subject to the governing statutory conditions.

Example of deduction allocation

Assume that a qualifying deduction would have been Rs. 36,50,000 without reorganisation, that the relevant tax year contains 365 days, and that reorganisation takes effect after 100 days. The predecessor bank's deduction is Rs. 10,00,000 (36,50,000 × 100 / 365). The successor's deduction is Rs. 26,50,000 (36,50,000 × 265 / 365). This illustration assumes the full deduction is otherwise eligible.

What happens to deductions in later tax years?

Section 64(3) provides a continuity rule for an undertaking transferred on reorganisation before the expiry of the deduction period under Section 44 or Section 52(1), Table, serial numbers 1 or 2. The successor co-operative bank or converted banking company is treated, for subsequent tax years, as the predecessor would have been treated if the reorganisation had not occurred. The rule does not create a fresh deduction period.

Relevant statutory definitions and terms

Business reorganisation: Read with Section 65, which supplies the interpretation applicable to Section 64, including the relevant forms of restructuring.
Predecessor co-operative bank: The co-operative banking institution whose undertaking or business is reorganised, as understood under Section 65.
Successor co-operative bank: The co-operative banking institution succeeding to the relevant business on reorganisation, subject to Section 65.
Converted banking company: The banking company resulting from the relevant conversion, as contemplated by Section 65.
Tax year: The statutory tax-year concept under the Income-tax Act, 2025; the number of days in that tax year determines the allocation denominator.

Practical compliance considerations

Maintain the reorganisation approval or scheme, effective date, undertaking-transfer records, depreciation and amortisation schedules, and a day-count reconciliation. Compute the deduction first under the relevant provision, then apply Section 64 to allocate it. Verify any conditions attached to the original deduction separately.

Relationship with the earlier Income-tax Act, 1961

Section 64 of the Income-tax Act, 2025 broadly carries forward the business-reorganisation deduction mechanism previously found in Section 44DB of the Income-tax Act, 1961. It must not be confused with Section 64 of the 1961 Act, which concerned clubbing of income and corresponds to a different provision in the 2025 Act.

Frequently asked questions

Does Section 64 allow an additional deduction on merger?

No. It apportions an otherwise eligible deduction; it does not independently create an extra deduction.

Is the reorganisation date included in the predecessor's period?

No. The predecessor's period ends on the immediately preceding day. The reorganisation date is counted in the successor's period.

Does the successor obtain a new amortisation period?

No. For deductions covered by Section 64(3), the successor continues the remaining period on the basis applicable to the predecessor.

Which provision defines the banks and the reorganisation?

Section 65 provides interpretation for Section 64 and should be consulted when determining whether a particular transaction qualifies.

Official legislation and resources

Income-tax Act, 2025 - official consolidated textIncome Tax Department - Act and Rules

Updated: 10 November 2026. This article is general legal information and should be read with the current statutory text.