In one of my earlier posts, I had analysed the structural gaps in the Income-tax Act, 2025 from the perspective of M&A, succession planning, and family arrangements.
That analysis is now captured in a detailed article published on Taxsutra. The article, titled “New Act, Old Problems: What the Income Tax Act, 2025 Did Not Fix for M&A and Succession,” examines how the New Act, effective 1 April 2026, is a redraft rather than a reform.
The article covers nine specific areas:
1. Misalignment between the expanded fast-track route under Section 233 and the tax, SEBI, and stamp duty frameworks
2. Continuation of the narrow demerger definition that excludes holding company reorganisations
3. Absence of a safe harbour for deferred and contingent consideration
4. Valuation trap where the signing-to-closing delta for listed companies or an otherwise arms’ length transaction for unlisted companies gets taxed on deemed basis
5. Internally inconsistent definition of “relative” that produces different tax outcomes for direct gifts and trust contributions
6. Missing statutory framework for family arrangements
7. Unresolved grandfathering questions on the cost of acquisitions in mergers and demergers
8. Loss carry-forward restrictions that exclude entire sectors and extinguish losses on group restructurings even when beneficial ownership is unchanged
9. ESOP Taxation vis-a-vis unlisted companies
The New Act represents Phase 1: a cleaner statute. Phase 2, the substantive policy restructuring of provisions governing corporate reorganisations, succession, and deal structuring, remains to be undertaken.