Section 52 · Computation of total income
Section 52 of the Income-tax Act, 2025 — Amortisation of Telecom, Amalgamation, Demerger & Voluntary Retirement (VRS) Expenditure
By CA Rajat Agrawal
Updated 04 Jul 2026
Chapter IV
📜 What the law says — Section 52, 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 successive tax years as mentioned in
column D of the said Table, beginning from the initial tax year specified in column
C thereof.
TABLE
Sl. Nature of expenditure Initial tax year Number of tax years
No. over which deduction of
expenditure is allowable
in equal instalments
A B C D
1. Expenditure incurred Tax year in which such Five tax years.
by an Indian company, amalgamation or
wholly and exclusively demerger takes place.
for the purposes of amal-
gamation or demerger of
an undertaking.
2. Amount paid to an Tax year in which such Five tax years.
employee in connection payment is made.
with his voluntary retire-
ment as per any scheme
of voluntary retirement.
3. Capital expenditure Tax year in which,— Number of years com-
incurred and actually (a) the business to mencing from the initial
paid for acquiring any operate telecom tax year and ending in
right to use spectrum services is com- the tax year up to which
for telecommunication menced; or the spectrum for which
services (spectrum fee). the fee is paid remains
(b) spectrum fee is in force.
actually paid,
whichever is later.
4. Capital expenditure in- Tax year in which,— Number of years com-
curred and actually paid (a) the business to mencing from the initial
for acquiring any right operate telecom tax year and ending in the
to operate telecommu- services is com- tax year up to which the
nication services (herein menced; or licence for which the fee
referred to as licence is paid remains in force.
In plain language
What Section 52 is all about
Section 52 of the Income-tax Act, 2025 (effective 1 April 2026) is a consolidated "amortisation" section. It brings together, in one place, four different types of business expenditure that the law does not allow you to deduct in one shot. Instead, the cost is spread out (amortised) over several years in equal instalments. The four items are:
- Telecom spectrum fee — money paid to acquire the right to use radio-frequency spectrum (old Section 35ABA).
- Telecom licence fee — money paid to obtain a licence to operate telecommunication services (old Section 35ABB).
- Amalgamation or demerger expenditure — legal, professional and other costs an Indian company incurs wholly and exclusively for a merger or demerger (old Section 35DD).
- Voluntary Retirement Scheme (VRS) payments — sums paid to employees who take voluntary retirement (old Section 35DDA).
Who does it apply to?
- Telecom operators who buy spectrum or a licence — the deduction runs across the years the spectrum/licence stays in force.
- Indian companies undergoing amalgamation or demerger — only an Indian company can claim the amalgamation/demerger amortisation.
- Any business (assessee) — company, firm, LLP or proprietor — that pays employees under a voluntary retirement scheme.
How the amortisation works
Amalgamation/demerger and VRS follow the same rule: the expenditure is deducted in five equal annual instalments of one-fifth (20%) each, starting from the tax year in which the expenditure is incurred (for VRS) or in which the amalgamation/demerger takes place. So a ₹50 lakh VRS payout gives you ₹10 lakh of deduction a year for five years.
Telecom spectrum and licence fees are different — they are written off in equal instalments over the period the spectrum or licence remains in force (which can be far longer than five years, e.g. a 20-year licence). The instalment starts from the year the fee is actually paid.
The "no double deduction" bar
Section 52 makes clear that you cannot claim the same expenditure twice. If a cost is amortised under this section, no depreciation can be claimed on the same spectrum/licence, and no deduction of the amalgamation/demerger or VRS expense is available under any other provision of the Act. One expense, one route.
What happens on a merger, demerger or reorganisation?
This is a key taxpayer-friendly feature. If, before the amortisation period ends, the business is transferred in a scheme of amalgamation or demerger, or undergoes a specified business reorganisation (including conversion of a firm/proprietary concern into a company, or a company into an LLP), the successor entity steps into the shoes of the predecessor. The remaining instalments continue to be allowed to the successor "as if the transfer had not taken place." In the year of transfer, the predecessor gets no instalment — the successor takes it. This prevents the deduction from being lost midway.
Practical implications
- Plan your cash flow and tax: a large VRS payout or merger cost does not reduce this year's tax bill fully — only 20% lands each year, so model your effective tax over five years.
- Keep documentation: retain invoices, board resolutions, the VRS scheme document and the merger/demerger scheme approved by the NCLT, because the deduction is claimed year after year and may be examined in any of those years.
- Successor companies must track the predecessor's unclaimed instalments and continue claiming them after a reorganisation.
- Rectification safeguard: if a condition later fails (e.g. the reorganisation does not qualify), the Assessing Officer can rectify past assessments.
💡 Example
Worked example 1 — VRS payout. Suppose "Sunrise Textiles Pvt Ltd" runs a voluntary retirement scheme in FY 2026-27 (tax year 2026-27) and pays ₹1,00,00,000 (₹1 crore) to retiring employees. Under Section 52, it cannot deduct the full ₹1 crore in FY 2026-27. Instead it deducts one-fifth = ₹20,00,000 each year for five years — FY 2026-27, 2027-28, 2028-29, 2029-30 and 2030-31. If Sunrise's tax rate is 25%, the ₹20 lakh yearly deduction saves roughly ₹5 lakh of tax per year, ₹25 lakh in total across five years.
Worked example 2 — Demerger with a mid-stream merger. "Zenith Ltd", an Indian company, spends ₹40,00,000 on legal and professional fees for a demerger completed in FY 2026-27. It deducts ₹8,00,000 (one-fifth) per year. After claiming for two years (₹16 lakh), Zenith is itself amalgamated into "Apex Ltd" in FY 2028-29. Because of Section 52's continuity rule, the remaining three instalments of ₹8 lakh each (₹24 lakh) are now claimed by Apex Ltd — the successor — over FY 2028-29 to 2030-31, exactly as Zenith would have. Nothing is lost.
A relatable story. Meena, who owns a small garment factory, wanted to trim her workforce humanely and offered a voluntary retirement package costing ₹30 lakh. Her accountant warned her not to expect the whole ₹30 lakh to slash this year's tax — Section 52 lets her write off only ₹6 lakh a year for five years. Meena was mildly disappointed at first, but her accountant pointed out the silver lining: the deduction keeps giving for five years, smoothing out her taxable profit, and even if she later converts her proprietary business into a private limited company, the new company simply continues the leftover instalments.
| Expenditure type | Old 1961 section | Amortisation period | Instalment each year | Starts from |
|---|
| Telecom spectrum fee | 35ABA | Years spectrum remains in force | Equal instalments over that period | Year fee actually paid |
| Telecom licence fee | 35ABB | Years licence remains in force | Equal instalments over that period | Year fee actually paid |
| Amalgamation / demerger expenditure (Indian company) | 35DD | 5 tax years | One-fifth (20%) | Year amalgamation/demerger takes place |
| Voluntary Retirement Scheme (VRS) payments | 35DDA | 5 tax years | One-fifth (20%) | Year payment is incurred |
Related sections
Section 33 — Deductions for depreciation on assets Section 51 — Amortisation of preliminary and pre-commencement expenditure Section 47 — General deductions allowable for business or profession Section 313 — Meaning of amalgamation, demerger and specified business reorganisation Section 70 — Capital gains exemption on transfer in amalgamation/demerger Section 36 — Carry forward and set off of accumulated loss on amalgamation/demerger
Frequently asked questions
Can I deduct the entire VRS payment in the year I pay it?
No. Section 52 requires VRS expenditure to be amortised in five equal annual instalments of one-fifth (20%) each, beginning with the year the payment is incurred. Only 20% is deductible in the first year.
Which old Income-tax Act, 1961 sections does Section 52 replace?
It consolidates four provisions — Section 35ABA (spectrum fee), Section 35ABB (telecom licence fee), Section 35DD (amalgamation/demerger expenditure) and Section 35DDA (VRS expenditure) — into a single section.
Who can claim the amalgamation or demerger amortisation?
Only an Indian company that incurs the expenditure wholly and exclusively for the purpose of amalgamation or demerger of an undertaking. The deduction is one-fifth of the cost for five successive years.
What happens to the remaining instalments if my company is merged before the five years end?
The successor (amalgamated or resulting) company continues to claim the leftover instalments as if the transfer had not happened. In the year of transfer the predecessor gets nothing and the successor takes the instalment.
Can I claim depreciation as well as the Section 52 deduction on the same telecom licence?
No. Section 52 bars a double benefit — if you amortise the spectrum or licence fee here, you cannot also claim depreciation on it, and amalgamation/demerger or VRS costs cannot be deducted under any other provision.
Over how many years is a telecom licence fee written off?
Unlike VRS or merger costs (fixed at five years), a telecom licence or spectrum fee is amortised in equal instalments over the period for which the licence or spectrum remains in force, which may be much longer than five years.
Does Section 52 apply when a firm converts into a company or a company into an LLP?
Yes. Such conversions are treated as specified business reorganisations, so the successor entity continues to claim the unexpired instalments of the amortised expenditure.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 04 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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