A not-so-sweet deal for M&A enthusiasts in Budget 2025: Less time for tax breaks, more red tape ahead

In a move that might leave merger and amalgamation (M&A) enthusiasts with a bitter taste, the latest budget brings a major change to the carry-forward of losses. Under the current system, companies undergoing amalgamation can carry forward losses for a generous eight-year period. But from April 1, 2025, onwards, that carry-forward period is being slashed — the losses will only be allowed for the residual period. So, if a merger happens five years after the company incurs a loss, it can only carry forward the loss for the remaining three years, reported TOI on Sunday.

For those unfamiliar, this carry-forward system is crucial as it helps offset taxable profits and reduce the tax burden for the new, amalgamated company. So, it's not exactly a small tweak — it’s a big hit for companies relying on those losses to cushion their tax bills.

However, not all is lost — for mergers taking place before March 31, 2025, the old rules will apply, meaning the losses can still be carried forward for up to eight years from the year of amalgamation. So, if your merger is in the pipeline before then, you’re safe.


That said, there's still some confusion around the exact applicability of the new rules, especially when it comes to the "appointed date" of the merger. As per the TOI report, Ameya Kunte, founder of Globeview Advisors, raises a valid point: What if the appointed date is before April 1, 2025, but the merger is approved afterward? Whether the new rules apply in such a case remains a bit murky.

On the brighter side, some experts are welcoming this change as a step toward clearer tax processes. Abhishek Goenka, founder of Aeka Advisors, sees the move as a good way to expedite tax clearance for mergers. After all, the extended loss carry-forward had been a sticking point for the tax department in approving M&A deals.

And there’s a glimmer of hope in Finance Minister Nirmala Sitharaman’s words about making the merger approval process faster and more efficient. If those promises are delivered, companies might at least get some relief in the form of quicker mergers, even if they can no longer rely on as many years of tax breaks.

So, while mergers might get faster, the road to tax relief just got a little bumpier.