The new Income-tax Act may be a fresh draft, but without real policy shifts, India’s M&A and demerger landscape is still stuck in Phase 1 – where legal form overrides commercial substance.
If we want to move to Phase 2 – a commercially aligned, faster, and globally competitive regime, here’s what needs to change:
– Speed + Certainty – NCLT route gives tax neutrality but takes ~12 months; faster routes don’t. We need parallel SEBI/NCLT approvals and tax neutrality for quick deals.
– Modern Definitions – Demerger benefits should apply even to holding-company structures and allow loss continuity for new-economy sectors.
– Deferred & Contingent Consideration – Tax only when received, aligning with global practice.
– Valuation Rules – Section 56(2)(x) should not tax genuine price movements between signing and closing.
– Succession & Family Settlements – Recognise trusts, beneficial ownership, and statutorily protect genuine family settlements to avoid needless litigation.
Bottom line: The law has been re-drafted, but the mindset needs reform. Moving to Phase 2 means aligning tax, regulatory, and approval processes with business reality.
My article on moneycontrol discusses all these points in detail: http://www.moneycontrol.com/news/opinion/india-s-m-a-and-demerger-is-still-stuck-in-the-old-mould-13546996.html