Section 52
Section 52: amortisation of amalgamation, demerger, VRS and telecom licence expenditure
Section 52 groups together four distinct categories of business expenditure that must be spread ("amortised") in equal instalments over a defined period, rather than deducted all at once: costs of amalgamation or demerger, payments to employees under a voluntary retirement scheme, and capital expenditure to acquire telecom spectrum or an operating licence.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
The four categories and their amortisation periods
Section 52(1) sets out a Table specifying the initial tax year and the number of years over which each type of expenditure is amortised in equal instalments:
| Nature of expenditure | Initial tax year | Amortisation period |
|---|---|---|
| Expenditure incurred wholly and exclusively for an amalgamation or demerger of an undertaking | Year in which the amalgamation/demerger takes place | 5 tax years |
| Amount paid to an employee in connection with voluntary retirement, under a VRS scheme | Year in which the payment is made | 5 tax years |
| Capital expenditure actually paid to acquire the right to use spectrum for telecom services (spectrum fee) | Year the telecom business commences, or the year the fee is paid, whichever is later | Number of years the spectrum remains in force, starting from the initial year |
| Capital expenditure actually paid to acquire the right to operate telecom services (licence fee) | Year the telecom business commences, or the year the fee is paid, whichever is later | Number of years the licence remains in force, starting from the initial year |
Transfer of spectrum or licence before amortisation completes
Section 52(2) deals with transfer of the spectrum/licence part-way through amortisation: if transfer proceeds (capital sums) are less than the unallowed expenditure, the shortfall is deducted in the transfer year; if proceeds exceed the unallowed expenditure (up to the original cost), the excess is taxed as business profit in the transfer year; if proceeds equal or exceed the original unallowed cost, no further deduction is allowed in the transfer year or afterward.
Section 52(3) provides a formula for partial transfers: the unallowed expenditure (less transfer proceeds) is divided by the number of relevant tax years remaining, to determine the continuing instalment.
Section 52(2)(e) confirms that on amalgamation or demerger of the licence/spectrum-holding entity into an Indian company, these transfer-consequence rules do not apply to the amalgamating/demerged company, and instead continue to apply to the amalgamated/resulting company as if the transfer had not taken place.
No double deduction
Section 52(4) bars claiming depreciation under Section 33 for spectrum/licence expenditure once amortised under this section, and bars any other deduction under the Act for amalgamation/demerger costs or VRS payments amortised here.
Recomputation on non-compliance, and reorganisation continuity
Section 52(5) allows the Assessing Officer to recompute total income (and deem the deduction wrongly allowed) if the assessee later fails to comply with the section's conditions in respect of spectrum-fee amortisation, subject to the rectification procedure under Section 287.
Section 52(6) provides that where a "specified business reorganisation" (amalgamation, demerger, succession to a company, or LLP conversion, each meeting specified conditions) takes place before the five-year VRS amortisation period ends, the provisions continue to apply to the successor entity, and no deduction is allowed to the predecessor for the year of reorganisation.
Frequently asked questions
Over how many years are amalgamation and demerger costs amortised?
Five tax years, in equal instalments, starting from the year the amalgamation or demerger takes place.
How long is a telecom spectrum fee amortised over?
Over the number of tax years for which the spectrum remains in force, starting from the year the telecom business commences or the year the fee is actually paid, whichever is later.
What happens if the telecom licence is sold before the amortisation period ends?
Under Section 52(2), if the sale proceeds are less than the unallowed expenditure, the shortfall is deducted in the year of sale; if proceeds exceed the unallowed expenditure (up to the original cost), the excess is taxed as business profit; if proceeds equal or exceed the original cost, no further deduction is allowed.
Related sections
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Plan your amalgamation, demerger, VRS or telecom licence amortisationLast updated 9 September 2026