Establish the qualifying reorganisation before dividing amounts
Section 64 of the Income-tax Act, 2025 allocates specified deductions where a co-operative bank undergoes business reorganisation during a tax year. Section 65 supplies the relevant definitions, including qualifying amalgamation, demerger and conversion of a primary co-operative bank. This is a specialised bank-reorganisation rule, not a universal day split for every company merger. The guide uses tax year 2026–27, beginning 1 April 2026; it does not replace earlier-year return section references mechanically. Income-tax Act, 2025, amended by Finance Act, 2026: sections 64–65.
Identify the deduction pool independently
Section 64 refers to deductions under sections 33, 44 and section 52(1), Table serials 1 or 2. Its formula input A is the deduction allowable to the predecessor if reorganisation had not occurred. Establish that counterfactual annual allowance from the underlying provision and supporting records. It is not necessarily book expense, the remaining unamortised asset or the purchase consideration. Keep separate deduction cohorts where their eligibility and remaining lives differ. Income-tax Act, 2025, amended by Finance Act, 2026: sections 64–65.
Count predecessor and successor days without overlap
The predecessor receives A multiplied by B/C, where B runs from the first day of the tax year through the day immediately before reorganisation. The successor or converted banking company receives A multiplied by D/C, with D running from reorganisation through the year's last day. C is the year's actual total days. Build one calendar schedule proving B plus D equals C. A month-count approximation can misallocate the same annual allowance even where both entities' numbers add up neatly. Income-tax Act, 2025, amended by Finance Act, 2026: sections 64–65.
Confirm what the effective date represents
Use the legally supported business-reorganisation date from the actual scheme and relevant facts. Do not substitute the announcement date, first consolidation entry, employee-transfer date or cash-settlement date merely because it is easy to extract. Section 65's qualifications must be reviewed in the relevant route; satisfying the arithmetic does not prove that an amalgamation, demerger or conversion meets the statutory definition. These examples expressly assume qualification and an established effective date. Income-tax Act, 2025, amended by Finance Act, 2026: sections 64–65.
Continue eligible instalments without restarting them
Section 64(3) addresses subsequent-year continuation of the specified section 44 and section 52 deductions where the undertaking transfers before their stated periods expire. Preserve the original cohort, amounts already allowed and remaining statutory period. Reorganisation is not a fresh expenditure event that automatically creates a new full deduction term. Keep this future continuation register separate from the current-year B/C and D/C allocation. Income-tax Act, 2025, amended by Finance Act, 2026: sections 64–65.
Close both taxpayers' claims together
Retain a joint bridge showing A, B, C, D, predecessor amount and successor amount for each eligible cohort. Reconcile actual return claims to that bridge, while assessing each taxpayer's other income, regime and compliance requirements independently. Use full precision for the allocation and apply the relevant return rounding separately. The six models below use ₹365,000 as an assumed eligible annual pool, giving ₹1,000 per day in this 365-day tax year solely to make day-count errors visible. Income-tax Act, 2025, amended by Finance Act, 2026: sections 64–65.
Applicable primary references
Income-tax Act, 2025, amended by Finance Act, 2026: sections 64–65
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Reorganisation on 1 October 2026
The predecessor period 1 April–30 September contains 183 days; the successor period 1 October–31 March contains 182. With A = ₹365,000, allocated deductions are ₹183,000 and ₹182,000. A six-month-each shortcut would not reproduce the actual-day rule.
Illustrative example 2: First day of the tax year
For a qualifying effective date of 1 April 2026, B is zero and D is 365. The assumed ₹365,000 annual pool is allocated ₹0 to the predecessor period and ₹365,000 to the successor period under this model.
Illustrative example 3: Last day of the tax year
For an effective date of 31 March 2027, B is 364 and D is 1. Allocations are ₹364,000 and ₹1,000. Counting 31 March for both entities would wrongly allocate ₹366,000 from one ₹365,000 pool.
Illustrative example 4: Reorganisation on 1 July 2026
April–June contains 91 days, leaving 274 days including 1 July for the successor. The same assumed pool produces ₹91,000 and ₹274,000. Verify the actual quarter's days rather than substituting 90 days.
Illustrative example 5: Reorganisation on 1 January 2027
The predecessor has 275 days and the successor 90. Allocations are ₹275,000 and ₹90,000. The effective day is included in the successor's 90-day interval.
Illustrative example 6: Two independently eligible cohorts
Assume A comprises eligible annual pools of ₹365,000 and ₹182,500, and the effective date is 1 October 2026. The predecessor allocations are ₹183,000 and ₹91,500, totalling ₹274,500. Successor allocations are ₹182,000 and ₹91,000, totalling ₹273,000. Their combined ₹547,500 equals both annual pools; retain the cohorts separately for later continuation.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify statutory route | Document the section 65 reorganisation category. |
| 2 | Verify qualifying conditions | Retain the scheme and route-specific legal analysis. |
| 3 | Establish effective date | Use the supported reorganisation date. |
| 4 | List deduction cohorts | Separate eligible section 33, 44 and section 52 pools. |
| 5 | Determine annual input A | Compute the predecessor's allowance absent reorganisation. |
| 6 | Count predecessor days | End the interval on the preceding day. |
| 7 | Count successor days | Include the effective day through tax-year end. |
| 8 | Check complete allocation | Prove B plus D equals C and claims total A. |
| 9 | Preserve continuing terms | Retain original cohorts and unexpired periods. |
| 10 | Reconcile both claims | Match return workings and applicable rounding without duplication. |
Sixteen practitioner FAQs
1. Does section 64 govern every merger?
No. It concerns the qualifying co-operative-bank reorganisation framework.
2. Where are the definitions found?
Section 65 defines the relevant terms for section 64.
3. Which period does this guide address?
Tax year 2026–27 under the Income-tax Act, 2025.
4. Is A automatically the book expense?
No. It is the allowance under the specified provision had reorganisation not occurred.
5. Which deductions are referenced?
Sections 33, 44 and section 52(1), Table serials 1 or 2.
6. Who gets the effective date?
The successor or converted banking-company interval includes it.
7. When does the predecessor interval end?
On the day immediately preceding reorganisation.
8. Can both entities count that date?
No. The two intervals must not overlap.
9. What is C?
The total number of days in the relevant tax year.
10. Can equal months replace actual days automatically?
No. The statutory formula uses days.
11. Does a correct split prove qualification?
No. The reorganisation conditions require separate evidence.
12. Can the announcement date replace the effective date?
Not merely for convenience; use the legally supported date.
13. Does reorganisation restart an instalment term?
Do not assume that. Preserve the original remaining period under subsection (3).
14. Should different expenditure cohorts be merged permanently?
No. Separate cohorts may have different eligibility and remaining terms.
15. Do the models calculate tax payable?
No. They allocate an assumed eligible deduction pool.
16. What is the essential joint check?
The predecessor and successor allocations must reconcile to the same verified annual allowance.
Conclusion
For qualifying co-operative-bank reorganisations, allocate the specified annual deduction by actual days. The reorganisation date belongs to the successor period, and continuing instalments need a separate ledger.