Chapter VII - Set Off, or Carry Forward and Set Off of Losses

Section 117

Section 117: accumulated losses and depreciation in statutory banking/insurance amalgamations

Section 117 is a special, narrower companion to Section 116. It applies specifically to amalgamations of banking companies, corresponding new banks, and Government general-insurance companies that are brought about under specific statutory schemes (rather than ordinary company-law amalgamations), and lets accumulated loss and unabsorbed depreciation carry over to the successor entity.

Official text

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Need advice on Section 117?

This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.

Statutory text

Bare law

(1) Irrespective of anything contained in section 2(6)(a) to (c) or section 116, where there has been an amalgamation of,— (a) one or more banking company with— (i) any other banking institution under a scheme sanctioned and brought into force by the Central Government under section 45(7) of the Banking Regulation Act, 1949; or (ii) any other banking institution or a company following a strategic disinvestment, wherein the amalgamation occurs within five years from the end of the tax year during which such disinvestment is carried out; or (b) one or more corresponding new bank or banks with any other corresponding new bank under a scheme brought into force by the Central Government under section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, or both; or (c) one or more Government company or companies with any other Government company under a scheme sanctioned and brought into force by the Central Government under section 16 of the General Insurance Business (Nationalisation) Act, 1972, the accumulated loss and unabsorbed depreciation of such banking company or companies or amalgamating corresponding new bank or banks or amalgamating Government company or companies, shall be deemed to be the loss or, allowance for depreciation of the banking institution or company or amalgamated corresponding new bank or amalgamated Government company for the tax year in which the scheme of amalgamation was brought into force and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly.

(2) Where any scheme of amalgamation as referred to in sub-section (1) is brought into force on or after the 1st April, 2025, any loss forming part of the accumulated loss of the predecessor entity, being— (i) the banking company or companies; (ii) the amalgamating corresponding new bank or banks; or (iii) the amalgamating Government company or companies, as the case may be, which is deemed to be the loss of the successor entity, being— (a) the banking institution or company; or (b) the amalgamated corresponding new bank or banks; or (c) the amalgamated Government company or companies, as the case may be, shall be carried forward in the hands of the successor entity for not more than eight tax years immediately succeeding the tax year for which such loss was first computed for original predecessor entity.

(3) For the purposes of this section,— (a) “accumulated loss” means so much of the loss of the amalgamating banking company or companies or amalgamating corresponding new bank or banks or amalgamating Government company or companies under the head “Profits and gains of business or profession” (excluding losses of a speculation business) which such predecessor entity would have been entitled to carry forward and set off under section 112 had the amalgamation not occurred; (b) “banking company” shall have the same meaning as assigned to it in section 5(c) of the Banking Regulation Act, 1949; (c) “banking institution” shall have the same meaning as assigned to it in section 45(15) of the Banking Regulation Act, 1949; (d) “corresponding new bank” shall have the same meaning as assigned to it in section 2(d) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, or section 2(b) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980; (e) “general insurance business” shall have the same meaning as assigned to it in section 3(g) of the General Insurance Business (Nationalisation) Act, 1972; (f) “Government company” means a Government company as defined in section 2(45) of the Companies Act, 2013, engaged in the general insurance business and established under section 4 or 5 or 16 of the General Insurance Business (Nationalisation) Act, 1972; (g) “original predecessor entity” means predecessor entity in respect of the first amalgamation; (h) “strategic disinvestment” shall have the meaning assigned to it in section 116(3)(c)(i); (i) “unabsorbed depreciation” means the allowance for depreciation of the amalgamating banking company or companies or amalgamating corresponding new bank or banks or amalgamating Government company or companies which remains to be allowed and which would have been allowed to such predecessor entity, had the amalgamation not occurred.

Introduction

Section 117 deals with accumulated losses and unabsorbed depreciation under particular amalgamation schemes. Its route and beneficiary are narrower than the general reorganisation rules in Section 116.

Key takeaways

Special bank or insurer amalgamation

This section provides a separate loss and unabsorbed-depreciation rule for the specified banking and Government insurance amalgamations.

Scheme eligibility

The treatment turns on the particular sanctioned scheme or strategic-disinvestment route and the conditions in this section, rather than on amalgamation alone.

Amalgamations covered

This section overrides Section 2(6)(a) to (c) and Section 116, and applies where there has been an amalgamation of:

One or more banking company with any other banking institution under a scheme sanctioned by the Central Government under Section 45(7) of the Banking Regulation Act, 1949, or with any other banking institution/company following a strategic disinvestment, where the amalgamation occurs within five years from the end of the tax year of that disinvestment;
One or more corresponding new bank with any other corresponding new bank, under a scheme brought into force under Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or 1980; or
One or more Government company with any other Government company, under a scheme sanctioned under Section 16 of the General Insurance Business (Nationalisation) Act, 1972.

Effect of the carry-over

In each of these cases, the accumulated loss and unabsorbed depreciation of the amalgamating banking company/bank/Government company is deemed to be the loss or depreciation allowance of the amalgamated banking institution, company, corresponding new bank or Government company for the tax year in which the scheme of amalgamation was brought into force, and the Act's ordinary set-off and carry-forward provisions then apply.

Eight-year carry-forward cap

For a scheme of amalgamation brought into force on or after 1 April 2025, a loss forming part of the accumulated loss of the predecessor entity that is deemed to be the successor's loss can be carried forward for not more than eight tax years immediately succeeding the tax year in which such loss was first computed for the original predecessor entity.

Key definitions

"Accumulated loss" means so much of the loss of the amalgamating entity under "Profits and gains of business or profession" (excluding speculation-business losses) as it would have been entitled to carry forward and set off under Section 112, had the amalgamation not occurred.

"Banking company", "banking institution", "corresponding new bank" and "general insurance business" carry the meanings given to them in the respective Banking Regulation Act, 1949, Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970/1980, and General Insurance Business (Nationalisation) Act, 1972.

"Government company" means a Government company under Section 2(45) of the Companies Act, 2013, engaged in general insurance business and established under Sections 4, 5 or 16 of the General Insurance Business (Nationalisation) Act, 1972.

"Strategic disinvestment" has the meaning assigned to it in Section 116(3)(c)(i).

"Unabsorbed depreciation" means the depreciation allowance of the amalgamating entity that remains to be allowed and would have been allowed had the amalgamation not occurred.

Step-by-step flow for applying Section 117

1
Is it one of the specified statutory amalgamations?
Banking company with a banking institution under a scheme under section 45(7) of the Banking Regulation Act, 1949, or following a strategic disinvestment (amalgamation within five years from the end of the tax year of disinvestment); corresponding new banks under section 9 of the 1970 or 1980 Banking Companies Acts; or Government general insurance companies under section 16 of the General Insurance Business (Nationalisation) Act, 1972.
- No: Consider Section 116 instead.
- Yes: Go to the next step; Section 117 applies irrespective of Section 2(6)(a) to (c) and Section 116.
2
Identify the accumulated loss and unabsorbed depreciation
Accumulated loss is business loss (excluding speculation loss) the predecessor could have carried forward under Section 112 had the amalgamation not occurred (Section 117(3)(a)).
3
Treat them as the successor's
They are deemed the loss or depreciation allowance of the successor for the tax year in which the scheme was brought into force; normal set-off and carry-forward rules then apply.
4
Was the scheme brought into force on or after 1 April 2025?
- Yes: The loss can be carried forward for not more than eight tax years immediately succeeding the tax year in which the original predecessor entity first computed it (Section 117(2)).
- No: Section 117(2) does not apply; apply the other carry-forward provisions.

Practical checklist

Do

Identify the precise scheme and entities named by Section 117 before carrying any loss or allowance.
Reconcile predecessor balances with the successor's opening tax records and statutory conditions.

Avoid

Do not assume every amalgamation qualifies under this special provision.
Do not duplicate the same carried-forward balance under Sections 116 and 117.

Illustrative example

Worked example: counting the eight-year window after a bank amalgamation

Hypothetical facts (illustration only, not a real taxpayer): Bank A (a corresponding new bank) first computed a business loss in Tax Year 1. In Tax Year 4 a scheme under section 9 of the relevant Banking Companies Act, brought into force after 1 April 2025, amalgamates Bank A into Bank B. Part of the loss is still unabsorbed.

Carry-over
The unabsorbed loss of Bank A is deemed Bank B's loss for Tax Year 4, the year the scheme came into force.
Start of the count
The eight years run from the tax year in which the original predecessor (Bank A) first computed the loss - Tax Year 1 - not from Tax Year 4.
Last year of use
Eight tax years immediately succeeding Tax Year 1 are Tax Years 2 to 9. Bank B can therefore use the loss up to Tax Year 9.

Outcome

Bank B has Tax Years 4 to 9 to absorb the inherited loss, not a fresh eight-year period.
Any speculation loss of Bank A is outside the "accumulated loss" definition.

Glossary

Amalgamation: Combination of qualifying entities under the applicable statutory scheme.
Carry-forward balance: Unused eligible loss or depreciation moving into a later tax year under the specified rule.

Frequently asked questions

How is Section 117 different from Section 116?

Section 116 covers general company amalgamations, demergers, and firm/company-to-LLP reorganisations. Section 117 is a narrower, dedicated provision for statutory amalgamations of banking companies, corresponding new banks, and Government general-insurance companies carried out under specific banking and insurance-nationalisation legislation.

How long can the carried-over loss be used?

For schemes of amalgamation brought into force on or after 1 April 2025, the loss can be carried forward for a maximum of eight tax years counted from the year it was first computed for the original predecessor entity.

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Last updated 10 October 2026

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