Section 64 of the Income-tax Act, 2025 — Special Provision for Computing Deductions on Business Reorganisation of Co-operative Banks

In plain language

What Section 64 is about, in plain English

Section 64 of the Income-tax Act, 2025 lays down a special, ring-fenced rule for one narrow situation: when a co-operative bank is reorganised (through amalgamation, demerger, or conversion into a banking company) part-way through a tax year, how should certain business deductions be split between the old bank (the "predecessor") and the new bank (the "successor")? The section makes sure the deduction is apportioned fairly on a day-count basis — the predecessor gets the portion for the days it ran the undertaking, and the successor gets the rest — so no deduction is lost and none is claimed twice.

This provision is the 2025 Act's re-enactment of the old Section 44DB of the Income-tax Act, 1961. The concept, formula and definitions are carried forward almost unchanged; only the cross-references to other sections have been renumbered to fit the new Act.

Which deductions does it cover?

Section 64 governs the manner of allowing three specific business deductions in the year of reorganisation. In the language of the new Act these are:

• Section 33 — Depreciation on plant, machinery, buildings and other business assets (the 2025 equivalent of old Section 32).
• Section 44 — Amortisation of preliminary / certain capital expenditure (broadly the successor to old Sections 35D / 35DD-type write-offs).
• Section 52(1) — Amortisation of expenditure on amalgamation, demerger or voluntary retirement (aligned with old Section 35DD/35DDA).

Without a special rule, a mid-year merger would raise an awkward question — does the predecessor claim the full-year deduction, or the successor? Section 64 answers this by splitting the amount strictly by days.

Who does it apply to?

• Co-operative banks only — not ordinary companies, firms or individuals. It applies where a predecessor co-operative bank is succeeded by a successor co-operative bank, or a primary co-operative bank converts into a banking company (a "converted banking company").
• It is triggered only by a "business reorganisation" — meaning an amalgamation of co-operative banks, a demerger of a co-operative bank, or the conversion of a primary co-operative bank into a banking company under a Reserve Bank of India (RBI) scheme.

How the apportionment formula works

For the tax year in which the reorganisation happens, the deduction that would otherwise have been allowed for the whole year is split using a day-count ratio:

• Predecessor co-operative bank gets: A × B ÷ C
• Successor co-operative bank / converted banking company gets: A × D ÷ C

Where A = the full deduction that would have been allowed had no reorganisation taken place; B = number of days from the start of the tax year up to the day before the reorganisation; C = total number of days in the tax year; and D = number of days from the date of reorganisation to the end of the tax year. Note that B + D = C, so the two halves always add back to the full deduction — nothing is lost.

Continuity of deductions in later years

Section 64 also protects future-year deductions. Where an undertaking of the predecessor is transferred to the successor (or converted banking company) as part of the reorganisation, the running amortisation deductions under Section 44 / Section 52(1) continue in the successor's hands in subsequent years — computed exactly as they would have been for the predecessor, as if the reorganisation had never happened. In short, the tax "clock" on multi-year write-offs is not reset by the merger.

How it interacts with related sections

• It works alongside Section 118 (the 2025 Act rule for carry-forward and set-off of accumulated losses and unabsorbed depreciation of co-operative banks on reorganisation — the successor to old Section 72AB).
• The deductions it apportions are themselves defined in Sections 33, 44 and 52.
• Capital-gains neutrality for these reorganisations is dealt with separately under the Act's exempt-transfer / amalgamation-demerger provisions.

Practical implications

• No double-claiming and no loss: the day-count split keeps the total deduction intact and correctly divided.
• Get the reorganisation date right: the effective date fixed by the RBI/registrar scheme drives B, D and C — an error shifts the deduction between two different taxpayers.
• Maintain clean asset and expense schedules: since the successor inherits the ongoing amortisation, opening WDV and unamortised balances must be transferred and documented accurately.
• This is a computation rule, not a tax holiday: Section 64 gives no extra deduction — it only decides who claims how much and when.